U.S. Government Launches New Plan to Help Borrowers Stay in Homes

The U.S. government on Wednesday launched a housing plan designed to help prevent borrowers from losing their homes through refinanced mortgages or loans that are modified to lower monthly payments.

The plan was announced two weeks ago by U.S. President Barack Obama and offers assistance to as many as 7 to 9 million homeowners. The Treasury Department released detailed guidelines on Wednesday to enable the lending industry to begin helping eligible borrowers.

"It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive," Treasury Secretary Timothy Geithner said in a statement.

"Economic recovery requires action on all three fronts," he said.

According to the statement, the guidelines will implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications.

Borrowers will have to provide their most recent tax returns and two pay stubs, as well as an affidavit of financial hardship to qualify for the 75-billion-loan modification plan, which runs through 2012.

Borrowers will only allowed to have their loans modified once, and the plan only applies for loans made on Jan. 1, 2009 or earlier. Up to 4 million borrowers are expected to qualify.

To help borrowers determine if they are eligible, the government has put answers to common questions and assessment tools on the website.

Separately, up to 5 million borrowers who have mortgages held by Fannie Mae and Freddie Mac, two government-controlled mortgage finance giants, should be eligible to refinance through June 2010.

To ensure the plan can be implemented as quickly as possible, the government has conducted extensive outreach with housing counselors and mortgage services to prepare them for incoming inquires from borrowers in the wake of the guidelines release, the statement said.

It said an expanded online resource will soon be available for borrowers, and agency representatives will fan out across the country in the coming weeks to conduct outreach at home-ownership events in communities hardest hit by the housing crisis.