As the country is counting down to the Obama days, the Bush administration is making changes to its Hope for Homeowners mortgage rescue plan. This program, which is under the Department of Housing and Urban Development (HUD), has not been very successful in helping homeowners with home loans and monthly payments on mortgage.

HUD Secretary Steve Preston explains: “Clearly, meaningful changes were needed… these modifications should increase lender participation and help more families who are having difficulty paying their existing monthly payments on mortgages, but can afford a new affordable home loan insured by HUD’s Federal Housing Administration.”

The following are the changes that will give more hope, so to speak, for homeowners:

1) Smaller writedowns – to encourage lenders to participate, they won’t have to write down loans as much, with a change in ratio from 90% to 96.5%, for the reduction of mortgage principals. However, this new ratio applies only to those whose loan payments won’t exceed 31% of their gross incomes. Otherwise, the 90% ratio is applied. Lenders shoulder less of the financial burden, making them more willing to refinance home loans.

2) Payments to lien holders – HUD will pay up-front, to encourage second lien holders to agree to refinancing. This will speed up the mortgage modification process for home loans, to make for more agreeable monthly mortgage payments.

3) 40-year mortgages – Lenders will be allowed to use 40-year payment terms for home loans, up from 30, the usual time span. This can reduce the monthly payment on mortgages to affordable levels. In some cases, the monthly payment is the difference between a good home loan and an unworkable one.

4) No trial runs – Originally, the first three payments of the modified terms had to be paid faithfully. The new guidelines remove this, making it easier for those who need more leeway with their finances.

These changes have received approval from an author of the original bill, Rep. Barney Frank (Democratic-Mass.). It is hoped that these revisions changes will encourage more people to get into the Hope for Homeowners program to receive help for their home loans and monthly mortgage payments.

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