Payments that do not exceed 38 percent of a borrower's income will be considered affordable.
The regulator for mortgage finance companies Fannie Mae and Freddie Mac said it would unveil on Tuesday a new loan modification program that is meant to make mortgage payments more affordable and prevent foreclosures.
Sources had told Reuters on Monday that under the plan, mortgage servicers will lower a homeowner's monthly payments to affordable levels if such a move will keep those borrowers in their homes.
Payments that do not exceed 38 percent of a borrower's income will be considered affordable, the sources said.
Officials from the Federal Housing Finance Agency and the Treasury and representatives from the mortgage lending industry will hold a news conference on the plan at 2 p.m. EDT.
Since Fannie Mae and Freddie Mac are the nation's two largest mortgage finance companies, their business practices often become the industry standard. Policy-makers hope the new plan will encourage other mortgage finance companies to show forbearance on troubled loans.
LOAN MODIFICATION MODEL:
The plan is similar to one conceived by the Federal Deposit Insurance Corporation to better match a troubled borrower's income with his monthly payments.
The FDIC turned IndyMac Bancorp Inc into a petri dish for such loan modifications when it seized the failed company in July.
FDIC Chairman Sheila Bair is not scheduled to take part in the event on Tuesday, which will take place at the offices of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac.
Separately, the Department of Housing and Urban Development is considering an expansion of its own aid program -- Hope for Homeowners -- under which HUD's Federal Housing Administration can tap a $300 billion kitty to underwrite failing loans, the sources said.
That program, which Congress approved in July, went into effect in October. However, it got off to a slow start and officials are eager to loosen the terms and cut some red tape to make it more appealing to mortgage companies.
Under the program in its current form, a mortgage finance company must have a home reappraised and then erase ten percent of its value before the loan can win a government guarantee. Policy-makers are considering lowering that required write-off, sources said.
The HUD does not plan to announce a change to the Hope for Homeowners program on Tuesday, an agency spokesman said .
The mortgage industry will be represented on Tuesday by HOPE NOW -- a coalition of lenders, mortgages services and investors brought together under the auspices of the Treasury Department to expand aid to homeowners.
While the group has helped conceive plans to ease loan terms, many consumer groups have said such an industry-led effort to staunch foreclosures is not enough.
