"President Barack Obama mortgage debt reduce"
Affordable loan payments is Anounced today "Obama Principal reduction plan"
The plan comes as President Barack Obama is under increasing political pressure to change his strategy for helping struggling homeowners and stem the tide of rising foreclosures and is the second major housing initiative announced in as many months.
Delinquencies on U.S. mortgages rose to nearly 14 percent in late 2009, led by a sharp increase in seriously overdue home loans held by the most credit-worthy borrowers, U.S. banking regulators said earlier on Thursday.
The new measures are a shift from the efforts announced last year, which focused on reducing interest rates for struggling borrowers who got risky loans.
The plan would also enable the borrowers' existing mortgage companies to receive incentives to lower their principal balances.
To be eligible for the FHA refinancing program, borrowers who owe more than the value of their homes, known as being "under water," must not have fallen behind on their existing mortgage payments.
Separately, the program also would reduce monthly payments for unemployed homeowners for up to six months.
The administration cautioned that the plan isn't intended to stop all foreclosures or assist all troubled homeowners.
"There's no intention here of tackling what may be 10 to 12 million foreclosures over the course of the next three years," said Diana Farrell, a White House economic adviser.
Instead, officials said, the goal is to make it more likely the administration will meet its original target, announced last year, of assisting 3 million to 4 million struggling homeowners.
It also includes three to six months of temporary aid for borrowers who have lost their jobs. And there will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans – a problem that has blocked many loan modifications.
The plan will also allow lenders to refinance mortgages that are under water with a new loan backed by the FHA. Lenders will have to reduce the first mortgage by at least 10 percent. And the combined total of second mortgages and other liens cannot be more than 115 percent of the current value of the home.