The Obama administration has released the guidelines that loan servicers will use to determine who is eligible for mortgage loan modifications and refinancings under a new initiative aimed at helping up to 9 million homeowners avoid foreclosure.

The Homeowner Affordability and Stability Plan’s "Home Affordable Refinance" component will rely on Fannie Mae and Freddie Mac to refinance 4 million to 5 million mortgages for borrowers who might otherwise be unable to refinance because their homes have lost value and they have less than 20 percent equity in their property.

First American CoreLogic released a report Wednesday estimating that more than 8.3 million homeowners were "upside down" at the end of 2008, meaning they owed more on their mortgage than their homes were worth.

The "Home Affordable Modification" component of the initiative will provide insurance and incentives for both borrowers and lenders that the Obama administration hopes will generate 3 million to 4 million loan modifications.

When the plan was announced, the Mortgage Bankers Association pointed out that it would not help borrowers refinance if their loan-to-value ratio had ballooned past 105 percent, or if their loans aren’t owned or guaranteed by Fannie and Freddie (see story).

Although those aspects of the program remain in place, the MBA said Wednesday that it was pleased that mortgages of up to $729,750 will qualify for modifications under the program’s guidelines, regardless of whether they are in high-cost areas.

The National Association of Realtors welcomed the release of the guidelines, saying the initiative will help stabilize home prices by helping "millions of families avoid foreclosure."

But NAR said in addition to preventing foreclosures, incentives for buyers are needed. The group called for "creative approaches that will lower interest rates for all homeowners and buyers."


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