WASHINGTON — The Obama administration on Friday announced a major reworking of its $75 billion plan to prevent foreclosures. The revamped program is now designed to aid jobless homeowners and people who owe more on their mortgages than their homes are worth.

Here’s a look at the details:

Q: How many homeowners will this help?

A: The effort is designed to enable the government to reach its original goal of helping 3 million to 4 million homeowners avoid foreclosure by 2013. That benchmark has so far proved impossible to approach. Only 170,000 homeowners have completed loan modifications, out of 1.1 million who began the government’s Home Affordable Modification Program since it started last year.

Q: How many borrowers are in trouble?

A: About 6 million homeown- ers have missed at least two months of payments. And experts warn that 10 million to 12 million borrowers are in danger of foreclosure over the next three years. A growing risk is among homeowners who are “underwater” – they owe more on their loans than their homes are worth.

Q: How does the new plan work?

A: Borrowers will get help in three ways: Jobless homeowners can get a three- to six-month break on their mortgage payments; banks will get financial incentives to reduce mortgage balances for underwater borrowers; and lenders can offer refinanced loans backed by the Federal Housing Administration to these borrowers.

Q: When will all these programs be available?

A: Government officials didn’t specify but said they should become available in the next few months.

Q: I’m unemployed. How do I get help?

A: Borrowers will have three to six months in which they’ll have to spend no more than 31 percent of their monthly income on their mortgages. If you find a job during that time, you will be evaluated for a loan modification that could permanently reduce your payments. To qualify, you need to live in your home, have a mortgage of below $729,750 and receive unemployment benefits.

Q: What happens if I don’t get a job after the time is up?

A: Lenders will encourage you to sell your home for less than the mortgage amount (a short sale). Another option is a deed in lieu of foreclosure, in which you agree to hand back the property to your lender.

Q: I owe more on my mortgage than my house is worth. Will this help me?

A: Maybe. The program depends on the willingness of mortgage firms to participate. Their record has been shaky.

Q: How does it work?


A: Mortgage companies that already participate in the federal foreclosure prevention program will have to consider reducing the mortgage amount for borrowers who owe at least 15 percent more than their home’s current value. Those reductions will happen gradually over three years and apply only if you miss no payments. Those companies will receive expanded incentives to do so.

Q: What kind of incentives will the companies receive?

A: For every dollar of principal the lender reduces, they will receive a subsidy of 10 to 21 cents. The larger subsidies will help cut the principal of borrowers who are less underwater.

Q: How do I qualify for the program?

A: You must have a mortgage of less than $729,750. You also must show that you are in financial trouble, and you have to be spending at least 31 percent of your pretax income on your mortgage payment.

Q: How do I apply to the program?

A: Call the company that sends your mortgage bill, also known as your mortgage servicer, to see if you qualify. If you can’t reach someone, try a nonprofit housing counselor. NeighborWorks America runs a network of foreclosure counseling agencies. Try www.findaforeclosurecounselor.org/


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.