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Thursday Mar 05, 2009

US launches aid program to stem home foreclosures

WASHINGTON, March 4, 2009 (AFP) - The US government Wednesday launched a financial aid program to help distressed homeowners keep their homes, designed to stem a flood of foreclosures at the center of the country's recession.

The Treasury Department unveiled guidelines for the "Making Home Affordable" program aimed at helping between seven and nine million eligible homeowners get modified home loans to ease their mortgage payments.

Obama announced the aid program last month, funded by more than 75 billion dollars in taxpayer dollars, to stamp out foreclosures that are exacerbating the housing slump.

According to the Treasury, a foreclosed home reduces the value of adjoining homes on average by nine percent.

"Two weeks ago, the president laid out a clear path forward to helping up to nine million families restructure or refinance their mortgages to a payment that is affordable now and into the future," Treasury Secretary Timothy Geithner said in a statement.

Geithner said the program details would provide loan servicers with the tools they need to begin helping eligible borrowers, putting in motion a key element of the Obama administration's efforts to pull the economy out of a deepening recession.

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

Under the program, the Treasury has pledged 15 billion dollars and government-controlled mortgage finance giants Fannie Mae and Freddie 60 billion dollars to help borrowers reduce their monthly mortgage payments.

That element of the program is aimed at between three and four million homeowners at risk of default.

Another initiative targets between four and five million "responsible" borrowers who have loans guaranteed by Fannie Mae or Freddie Mac to help them refinance.

The program provides federal financial incentives to lenders and eligible homeowners to seek loan modifications to avert foreclosures.

Measures include a Treasury share in financial institutions' cost of reducing loan payments and a 1,000-dollar incentive paid to loan services for each loan modification made under the program.

"Responsible" borrowers who have been current on loan payments but are "at risk of imminent default" will receive 1,500 dollars for obtaining a loan modification, while the lender will get 500 dollars, the Treasury said.

The Treasury recently raised its lines of credit to Fannie Mae and Freddie Mac, to 200 billion dollars from 100 billion each, to prevent their collapse.

hh-vs/rl - AFP

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