Business news outlet CNBC is reporting that the Obama administration will announce important new initiatives to deal with the depressed housing markets later today.
There will be changes to the battered-down Home Affordable Modification Program (HAMP), including a new emphasis on writing down the principal on troubled mortgage loans, and financial assistance to unemployed homeowners.
With the jobless rate still near 10 percent, more people are falling behind on payments and heading into delinquency, unlike the earlier stage of the crisis when many foreclosures were the result of bad lending in the subprime mortgage market.
A new measure would attack that problem by giving unemployed homeowners three months of forbearance, essentially buying time.
A write-down in the principal of the loan, as opposed to a simple reduction in the mortgage rate, will now be given serious consideration; loan servicers will receive additional incentives the longer the loan stays current.
More incentives will also be provided to second-mortgage holders to write down the value of those loans.
It will be interesting to see what those incentives are, because second mortgages can already be eliminated in many cases by using the Chapter 13 bankruptcy laws.
By Doug Beaton