New Loan Modification Program by The President

President Obama took the most aggressive initiative so far to tackle the foreclosure crisis by launching the new loan modification program to aid homeowners. This is regarded as the most important initiative to help homeowners after the housing slump started. Particular guidelines regarding the eligibility for these programs were issued on March 4, 2009.

The expenses for this loan modification program would amount to the extent of $275 billion and this program would allow five million homeowners who have small equity in their houses or whose home values are upside down, to refinance mortgages with Freddie Mac and Fannie Mae that are government-regulated mortgage lenders.

The government has earmarked $200 billion for supporting the two lenders who would have a key role in the recovery process. The program is substantially dependent on forcing lenders to amend troubled loans. President Obama declared that he would endorse laws offering bankruptcy courts authority to alter loan terms - which is an intimidating punishment planned to motivate lenders more to stop foreclosures.

Furthermore, the government intends to spend $75 billion to promote lenders for modifying mortgage terms for individuals facing foreclosure or undergoing foreclosure procedures. The government and lenders would reduce monthly payments to 31% of the income of the homeowners in co-operation.

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