Obama rolls out new housing plan to help unemployed mortgage holders

The plan makes changes to programs that would lower mortgage costs for the unemployed, and for those who owe more on their mortgages than their homes are worth.

The administration would require lenders to cut principal amounts on “underwater” mortgages and would give jobless workers significant help by reducing their loan payments to just 31 percent of their income, officials announced Friday.

For the administration's Web site click here. 

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The changes would impact the controversial Home Affordable Modification Program (HAMP) as well as Federal Housing Administration programs.

It comes after the administration has been hammered for its handling of the housing crisis.

In a letter to Treasury Secretary Timothy Geithner earlier this week, two dozen House Democrats said the foreclosure crisis had only worsened under the Obama administration.

Separately, the Government Accountability Office on Thursday reported that HAMP continues to face implementation problems.

At its inception a year ago, the White House estimated the program would help 3 million to 4 million borrowers. Fewer than 200,000 permanent modifications have been made, according to data collected in February. 

The crisis in the housing market has been exacerbated by high unemployment that is expected to remain a problem for much of the year.

While the housing crisis was sparked by a price bubble and a variety of risky loans given to borrowers who could not afford them, the more recent troubles have been related to massive job losses. Workers unemployed for months have struggled to come up with mortgage payments.

Given the fact that unemployment is expected to remain relatively high throughout the year, borrowers are expected to remain under significant pressure.

Unemployment stands at 9.7 percent, and sales of new homes fell to a record low in February, according to data released this week by the Commerce Department.

This story was posted at 9:58 a.m. and updated at 11:24 a.m.