Treasury To Double Housing Assistance Payments By $5,000

WASHINGTON – U.S. officials will double payments to homeowners who have been receiving help under a federal mortgage-assistance program, boosting the government’s ability to spend unused funds set aside under the 2008 financial rescue.

The Treasury Department said Thursday that around 1 million homeowners currently enrolled in the government’s Home Affordable Modification Program will be eligible for an extra $5,000 in payments toward their mortgage balances.

Treasury officials hope the new funds will give borrowers an incentive to stay current on their payments — given that many homeowners who had their loans modified in 2009 and 2010 are now seeing their interest rates rise. The HAMP program gave borrowers rates as low as 2% for an initial 5-year period.

In addition, the changes to HAMP will allow the Treasury to spend more federal housing-relief funds, which were a part of the 2008 Wall Street rescue. As of this month, only $14.6 billion of the $38.4 billion set aside for housing from the 2008 Wall Street rescue had been spent, according to Treasury statistics.

The HAMP program, unveiled by the Obama administration in 2009, has been met with setbacks, including criticism that banks and mortgage servicers weren’t adequately prepared to handle the high volume of modification requests, and that the program required too much complex paperwork.

Previously, homeowners who stayed in the program had been eligible for $5,000 in payments paid out gradually over five years. Now, they will be eligible for another $5,000 paid in the sixth year.

The change will help homeowners “continue making their mortgage payments on time and re-build equity in their homes,” said Michael Stegman, a Treasury housing policy official, in a speech Thursday.

The HAMP program seeks to reduce monthly payments for borrowers by extending loan terms, lowering interest rates and reducing principal balances.

As of the first half of this year, nearly 1.4 million borrowers had started loan assistance plans under HAMP, with nearly 400,000 dropping out and roughly 30,000 borrowers paying off their loans. The remaining 960,000 homeowners were still enrolled in the program, according to Treasury statistics.

The Treasury also said it would increase relocation assistance to troubled homeowners who sell their homes for less than the total mortgage balance, or those who hand over the deed to their homes instead of a foreclosure. The amount is being hiked to $10,000, up from $3,000 in relocation assistance previously offered.