New changes give more flexibility to loan servicers, plus new help for home owners who are stuck in homes that are worth less than what is owed on the property. There's also more help for unemployed home owners.

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Help for Struggling Home Owners from FHA and Homeowner Bailout Plan

The Obama administration has announced additional changes to both FHA programs and the Obama homeowner bailout plan known as HAMP, the Home Affordable Modification Program. According to the announcement, the new changes give more flexibility to loan servicers, plus new help for home owners who are stuck in homes that are worth less than what is owed on the property. There's also more help for unemployed home owners.

As many as four million homeowners could get help from these expanded programs by 2012, with the federal government funding the program for up to $50 billion through the Troubled Asset Relief Program or TARP.

WHAT DO THESE CHANGES MEAN TO HOMEOWNERS?

From the start, Home Affordable programs were not designed to be permanent solutions. According to HomeAffordable.gov, the changes provide "temporary mortgage assistance to some unemployed home owners" and offer FHA and conventional loan services more incentive to write down mortgage debt in connection with Home Affordable Modification Plan arrangements. Some parts of the plan are contingent on employment status; other parts of the Obama homeowner bailout are designed to be administered over a three-year period. There is no "long-term" bailout plan; HAMP and FHA homeowner relief programs are designed to help borrowers overcome problems created by unemployment and a troubled housing market-conditions the government does not view as permanent problems.

The aspect of the most recent changes that should be most attractive to home owners in danger of default or foreclosure is an emphasis on writing down the principal amount of the loan-cutting the amount owned on the loan itself (as opposed to interest rate payments). Change the amount on the principal and the amount of interest paid also goes down over the lifetime of the loan.

The Obama administration wants to encourage lenders to cut payments on qualifying loans so that they total no more than 31 percent of the borrower's income. Instructions to loan officers for reducing the principal amount of a home loan include treating the write-down amount as forbearance, and parceling out the amount of debt forgiveness in three equal portions over three years; as a condition for this loan forgiveness the borrower is required to stay current on mortgage loan payments for the entire three years.

There is also help for the out-of-work home owner; unemployed borrowers can apply to have their mortgage payments lowered to "an affordable level" for up to six months while the mortgage holder looks for new work. The rules for getting unemployment assistance on a home loan include a requirement that the mortgage be under $729,750. The borrower must be able to prove they are receiving unemployment benefits.

At the time of the press release on March 26, 2010, the changes were not yet implemented-there is a timetable for them to go into effect but the announcement itself did not signal availability of the additional help. Borrowers in trouble should work closely with their FHA or conventional loan officers to learn when more homeowner bailout programs will be available to the borrowing public.