Federal Housing Authority Announces New Mortgage Aid Program

November 11, 2008 4:36 p.m. EST

Washington, DC (AHN) - The Federal Housing Authority announced Tuesday a broad-based plan to help thousands of homeowners renegotiate their loans to avoid delinquency.

The plan, which is a joint effort of the FHA, the Treasury Department, Wells Fargo and the Department of Housing and Urban Development, will commence on Dec. 15.

Homeowners who owe more than 90 percent than their home is currently worth and are three months or more behind on payments will be eligible for the program. The plan will look to set loan payments to 38 percent or less of a homeowner's monthly income.

One of the first actions to reducing monthly payments is to reduce interest rates on a given loan. Word has it that renegotiated loans could see an interest rate as low as 3 percent.

Other options include adjusted the length of loans from 30 years to 40 years as well as putting a chunk of the loan at the back end as an interest free balloon payment.

The program will impact Fannie Mae and Freddie Mac the most as the two entities have exposure to nearly half of the U.S residential loans.