Help Is on the Way? Obama Outlines Mortgage Plan

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What was initially unclear is whether homeowners who now owe more money than their homes are worth would qualify for such refinancing. Also unclear was exactly who else would or would not qualify for new loans.

The Treasury Department plans to develop uniform guidelines for loan modifications, but did not release those specifics today. Those are expected two weeks from today.

At-Risk Homeowners

A major part of the plan, and one that is likely to have the most immediate impact, will help 3 million to 4 million homeowners in foreclosure or at risk of imminent foreclosure.

These people, mostly with subprime and exotic loans, would have their monthly payments reduced, with lenders and the government splitting the costs involved with cutting the mortgages to lower rates.

The program is modeled, in part, on a formula that FDIC Chairwoman Sheila C. Bair has been using to help homeowners with mortgages at the failed IndyMac bank. Bair, through the government's takeover of IndyMac, has done more than 10,500 such loan modifications.

The first step is solely in the hands of the banks and other mortgage servicers. They have to somehow get the monthly mortgage payments down to 38 percent of the borrower's gross pay. The government will not assist in that part, leaving the banks and investors to take a loss as borrowers' monthly mortgage payments shrink.

Once that threshold is reached, government aid kicks in. The bank and the government will share the cost of getting that loan down to a 31 percent debt-to-income ratio. That lower interest rate must stay in effect for at least five years.

"This part of the plan will require both buyers and lenders to step up and do their part," Obama said. "Lenders will need to lower interest rates and share in the costs of reduced monthly payments in order to prevent another wave of foreclosures. Borrowers will be required to make payments on time in return for this opportunity to reduce those payments."

Unlike past proposals, this plan isn't just for those who are already in foreclosure; it will include people who are current on their mortgages but at risk of foreclosure.

It also provides financial incentives for banks to make the modifications and for borrowers to stay current on their loans.

Loan servicers get a $1,000 up-front fee for modifications that meet the requirements of the program and an additional $1,000 "success fee" each year a borrower stays current for up to three years.

Borrowers can get up to $1,000 a year for five years if they stay current on their modified mortgage payments.

This initiative will go solely to helping homeowners who commit to make payments to stay in their home. It will not aid speculators or house flippers.

ABC News asked Treasury Secretary Timothy Geithner about a criticism that the president's new plan provides financial incentives for lenders and borrowers to do what they should be doing anyway -- making payments on time and trying to stave off foreclosures.

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