Administration officials cautioned that the plan wouldn't stop all foreclosures or help all troubled homeowners. Instead, officials said, their goal is to meet their original target, announced last year, of helping 3 million to 4 million borrowers avoid foreclosure.
The new effort is designed to help two groups:
• Borrowers who owe more on their loans than their houses are worth. Nearly 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.
These people would be helped in either of two ways: Their mortgage companies can cut the total amount they owe on their mortgage. Or they can refinance into loans backed by the Federal Housing Administration, which insures loans against default. The FHA will get $14 billion in incentive money from the federal bailout fund.
• Unemployed borrowers. People receiving unemployment benefits would see their mortgage payments drop to no more than 31 percent of their monthly income — but only for three to six months. That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their home payments.
Regina Harvey, program director with Dominion Financial Management in Smyrna, said loss of income was the top reason cited for delinquency in the past month by people who came to the housing and financial counseling service for help with their mortgages.
"Anything that could provide assistance for a family that's dealing with a loss of income can give them a greater amount of time to find a job," she said.
The administration's existing program to prevent foreclosures has failed to make a big enough dent in the problem. A lack of planning and shifting rules on qualifications for it produced a huge backlog in the program, the special inspector general for the federal financial bailout fund told lawmakers this week. Only 170,000 homeowners have completed loan modifications of 1.1 million who began the program over the past year.
(2 of 2)List of problem banks growsWashington Report: Anti-Foreclosure Program
