He has all of the virtues I dislike and none of the vices I admire.

Sir Winston Churchill

A good cause

Mortgage help for underwater and unemployed

Sunday early evening , March 28, 2010.

We all know that the government's loan modification or the Home Affordable Modification Program (HAMP) was a dud —among other things, loan servicers made more money foreclosing property.

Finally, on March 26, 2010 the Administration announced adjustments to the HAMP and FHA programs, which would benefit "responsible" homeowners. The Administration understands that a homeowner is responsible if he is up to date on his home loan mortgage debt.

And of course, homeowners have to also qualify for the HAMP Program:

Eligible homeowners for modifications under HAMP must, for example: live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship.

The new flexibilities for the modification initiative announced today continue to target this group of homeowners.

Apparently, the Administration convinced lenders to share into a pool of $50 billion leftover from the TARP funds. From comments in this WSJ article, lenders would get 50 cents for each dollar that they write down of homeowners' loans —which interestingly enough, has the same positive effect for homeowners as the defeated loan "cramdown" legislation bill for bankruptcies.

Under that effort, mortgage investors would have to reduce loan balances by at least 10%—to 96.5% of the current property value—to refinance borrowers into an FHA-backed loan. While investors would take an upfront hit, they would transfer the risk of a future foreclosure onto the government. If second mortgages are involved, a higher 115% total debt qualifying limit is allowed.

As a consequence, it's also expected that the Obama administration will announce plans to allow unemployed borrowers to make sharply reduced payments—or take a break from making any payments—for at least three months and up to six months.