Foreclosure relief program is extended, expanded

Struggling homeowners are set to get more help from the federal government as the Obama administration extends its key foreclosure prevention plan for a year.

The administration also will expand those eligible for the program to include investors and will increase incentives for large banks to modify more troubled mortgages.

Originally set to expire in December 2012, the administration’s Home Affordable Modification Program will be extended for another year, government officials said Friday. The expansion is part of a renewed push by the Obama administration to right the housing market as it enters its fifth year of malaise.

“We are still coming back from the worst financial recession since the Great Depression, in which the abuses in the housing sector were the most prominent and have left the deepest legacy,” Gene Sperling, director of the National Economic Council, told reporters in a conference call. “It requires an all-out, all-of-the-above strategy.”

Officials would not say how many new borrowers the administration hoped to reach through the program expansion. The initiative was unveiled in 2009, with the goal of helping as many as 4 million borrowers receive modifications; it has helped only about 900,000 receive new mortgages to date.

The administration said it would expand the program by including a secondary evaluation for borrowers who might have hefty second mortgages or medical bills weighing down their finances. It also will expand the program to include so-called income properties, where the people living in the homes are paying rent.

The plan also will triple the incentives for mortgage servicers participating in the program to do principal write-downs. In addition, it will extend those incentives to loans owned or insured by mortgage giants Fannie Mae and Freddie Mac, which have been reluctant to reduce mortgage principal given that they have received enormous bailouts from American taxpayers.

alejandro.lazo@latimes.com