Subprime loan servicer Ocwen Financial Corp. said Monday it believes the company is the first to begin modifying mortgages under the terms called for under the Obama administration’s Making Home Affordable initiative.

The Making Home Affordable initiative will provide $75 billion in subsidies, insurance and incentives for borrowers and loan servicers with the goal of helping them modify 3 million to 4 million loans to prevent foreclosures.

Participating lenders must reduce a loan’s interest rate to get monthly mortgage payments down to no more than 38 percent of a borrower’s income. The initiative would provide dollar-for-dollar matches for further interest-rate reductions, bringing mortgage payments down to 31 percent of a borrower’s income.

Loan servicers could earn a $1,000 upfront fee for each loan modification, plus $1,000 a year for up to three years when borrowers stay current on their loans. Borrowers who stay current on their modified loans are eligible for principal reductions of up to $1,000 a year for five years.

Although Home Affordable servicing contracts haven’t been drawn up yet, Ocwen said it was able to adopt its automated loan servicing platform to comply with the government program.

Ocwen claims to have saved more than 90,000 homes from foreclosure, and that its "customized loan modifications" have a re-default rate of 24 percent after six months, compared with an industry average 41 percent.

The Home Affordable initiative also calls for lenders to refinance 4 million to 5 million mortgages owned or guaranteed by Fannie Mae and Freddie Mac. The program allows borrowers who might otherwise be unable to refinance because they have lost equity in their homes to take advantage of lower interest rates.

Bank of America said last week it had begun a first wave of Home Affordable refinancings, concentrating on borrowers who put at least 20 percent down and whose loans are serviced by Bank of America or Countrywide Home Loans (see story).

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