WASHINGTON: The Obama administration, in an election-year bid to help distressed homeowners, on Friday expanded its main foreclosure prevention program, and pushed for Fannie Mae and Freddie Mac to forgive mortgage debt.
The administration said it would extend the life of the Home Affordable Mortgage Program by a year through 2013 and widen it to reach more heavily indebted homeowners.
It also said it would provide incentives to encourage Fannie Mae and Freddie Mac, the government-controlled mortgage finance providers, to write down loans, an idea which their regulator has worried would unnecessarily add to the cost of taxpayer bailouts for the two firms.
The regulator, the Federal Housing Finance Agency, withheld final judgment on the proposal, saying it would study it further.
Fannie Mae and Freddie Mac own or guarantee about half of all US home loans, and their participation in principal reduction under HAMP could greatly expand the reach of the $29.9 billion program.
Nearly 11 million Americans are underwater on their mortgages - meaning they owe more than their homes are worth. With some key electoral swing states among the hardest hit by the housing crisis, the sector's health could become an important factor in November's elections.
President Barack Obama made clear in his State of the Union address on Tuesday that he would continue to press for aggressive action to help homeowners, and Friday's announcement was just the first of several on housing initiatives that are expected in coming weeks.
Republicans in the US House of Representatives last year sought to shut down HAMP, arguing it was ineffective, but the bill died in the Democratic-led Senate.
The HAMP program, which draws from the Treasury Department's financial bailout fund, pays mortgage servicers to rewrite loan terms to reduce monthly payments.
When the administration launched the program in 2009, it expected as many as 4 million loans would be modified. So far, only about 900,000 households have permanently won new loan terms. As of the end of last year, only about $3 billion had been spent of the $29 billion set aside for HAMP.
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