WASHINGTON — The government will let more borrowers qualify for a new $300 billion program that lets troubled home owners swap risky loans for more affordable ones, a Bush administration official said Wednesday.
Housing and Urban Development Secretary Steve Preston announced changes that aim to expand participation in the new “Hope for Homeowners” program.
Launched Oct. 1, the program is off to a slow start, with the government receiving just 111 applications in the first month.
Lenders blamed drawbacks to the program’s original design for their lack of participation. Among their complaints: Lenders were required to forgive large portions of defaulting loans and forfeit future equity to the government. Another provision left homeowners owing the federal government half the value their home gains years down the road.
Under the new rules, lenders would be allowed to take a smaller loss. New loans can be made for 96.5 percent of the home’s value, rather than the previous level of 90 percent.
“Few lenders have actually signed up, and few borrowers have submitted applications,” Preston said at the National Press Club. “Clearly meaningful changes are needed.”
The new guidelines apply only to borrowers who are spending up to 31 percent of their pretax income on their home loans.
