The Treasury Department added $3.1 billion to a
program intended to prevent troubled homeowners from going into foreclosure.
The decision, which brings the cost of the
Making Home Affordable program up to $18.3 billion, comes as home losses
continue to spiral and the credit market shows few signs of hospitality to
refinancers.
Under the program, the federal government
provides incentives to participating institutions to negotiate lower monthly
payments. If that fails to provide enough relief, lenders and loan servicers are encouraged to help
homeowners through a so-called "short sale," selling their
property for less than what they owe.
Because lenders have to approve such a
transaction, it is often a time-consuming and uncertain approach to avoiding
foreclosure. The result is typically better for consumers, however, because a
foreclosure will devastate a homeowner's credit score and hurt his or her ability
to get a mortgage in the future.
The government has committed $50 billion out of
the $700 billion bailout package to mortgage relief. According to Treasury, 50,000
homeowners are currently enrolled in the program.
Sixteen mortgage service companies are participating.
The latest addition, according to a Treasury announcement last week, is
Texas-based Residential Credit Solutions Inc. The company will receive up to $19.4
million in incentives.
Most of the additional funding, however, will go
to Countrywide Home Loans Servicing, a subsidiary of Bank of America Corp.
Countrywide received an increased payment of $3.3 billion, bringing its total
to $5.2 billion.
A few companies had their incentive amounts
reduced.
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