WASHINGTON — The Obama administration is trying to jump-start its sputtering attempts to tackle the foreclosure crisis with an effort to assist homeowners who owe more on their properties than their homes are worth.
The Federal Housing Administration will permit lenders to give these borrowers refinanced loans backed by the government. The lenders will be required to forgive at least 10 percent of the original mortgage amount. Investors who have control over the mortgages as part of their large portfolios will select which borrowers are invited to participate.
The plan was first announced in March. Its rollout represents the latest of numerous efforts by the administration to address the housing bust.
The lending industry was ill-prepared for a crush of distressed home owners, the economy worsened, and millions of homeowners had taken on so much debt that their financial woes have been nearly impossible to resolve.
Nearly half of the 1.3 million homeowners who have enrolled in the Obama administration’s main mortgage- relief program — overseen by the Treasury Department — have fallen out over the past year.
Many borrowers say the government program is a bureaucratic nightmare, with banks often losing their documents.
Banks say borrowers often didn’t return documents.
The new program takes a different approach. It allows investors in mortgage- backed securities to evaluate their holdings and select borrowers who will be offered refinanced mortgages guaranteed by the FHA. The Associated Press
