Homeowner Aid Expanded

The Obama administration announced programs to help U.S. homeowners avoid foreclosure, including subsidies for borrowers who owe more than their home is worth.

The plan expands Treasury Department and Federal Housing Administration efforts and uses funds from the $700 billion Troubled Asset Relief Program. The administration faced a week of criticism from lawmakers and watchdog groups who say the government hasn’t helped enough homeowners stave off foreclosures.

Foreclosures are expected to climb to 4.5 million this year from 2.8 million in 2009, according to RealtyTrac Inc., an Irvine, California-based research firm. The administration of President Barack Obama and banks including Wells Fargo & Co. and Bank of America Corp. have so far fallen short of meeting goals of the government’s foreclosure-prevention program, according to a report by Neil Barofsky, the TARP special inspector general.

The plan would increase payments to lenders that modify second mortgages. The administration proposed allowing more mortgages to be refinanced into FHA guarantee programs if the borrower is current on the loan. The lender would have to cut the amount owed by at least 10 percent to less than the value of the home. The first and second mortgages combined would have to be no more than 115 percent of the home’s value.

The Obama administration didn’t say how many homeowners would benefit specifically from the new programs offered. Officials said the programs will help assist the three to four million borrowers expected to benefit over the life of the broader housing effort.

The Treasury plan will help unemployed homeowners reduce mortgage payments for three to six months while they look for work. If homeowners don’t find a job in that time, or if they find a new job at a lower salary, they will be evaluated for further assistance.