WASHINGTON - Loans backed by the Federal Housing Administration will be eligible for payment reductions similar to the Obama administration’s loan-modification program, the government will announce today.
Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to “Making Home Affordable’’ to help lower their payments and avoid foreclosure.
The program, launched in March, is designed to lower monthly payments for 3 million to 4 million borrowers, although only about 200,000 have been helped so far. Lenders agreed this week to adjust 500,000 loans by Nov. 1.
The FHA, which backs about 5 million loans, is a government-run mortgage insurance program. It became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market.
By law, the FHA cannot offer borrowers interest rates as low as 2 percent, which are available under the Obama plan. Instead, the FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Lenders who participate will receive an incentive fee of up to $1,250 and can be reimbursed for $250 in costs.
