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The New York TimesWASHINGTON — The Obama administration on Wednesday began the most ambitious effort since the 1930s to help troubled homeowners, offering lenders and borrowers big incentives and subsidies to try to stem the wave of foreclosures.
People with mortgages as high as $729,750 could qualify for help, and there is no ceiling on how high their income can be as long as they are in danger of losing their homes. Interest rates on loans could go as low as 2 percent for some. Many homeowners could see their mortgage payments drop by several hundred dollars a month, and some could save more than $1,000 a month.
Administration officials estimate that the plan will help as many as four million people avoid foreclosure, at a cost to taxpayers of about $75 billion. In addition, the Treasury Department said it intended to follow up with a plan to help troubled borrowers with second mortgages, which many homebuyers used as “piggyback” loans to buy houses with no money down.
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The new plan, which takes effect immediately, is intended to win much bigger concessions from lenders by offering a mix of generous financial incentives and regulatory arm-twisting. The final impact will depend on how both lenders and the investors who own mortgages respond, but housing experts said the administration had a good chance of achieving its goal.
The eagerness with which lenders agree to modify loans is likely to be affected by a bill that the House is expected to take up on Thursday.
It would give bankruptcy judges the power to order changes in mortgages on primary residences and would protect loan-servicing companies from lawsuits by investors.
Several of the nation’s biggest mortgage-servicing companies, overseeing two-thirds of all home loans in the country — Citigroup, JPMorgan Chase, Bank of Amer ica and Wells Fargo are expected to participate in the plan.
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http://www.nytimes.com/2009/03/05/business/05housing.html?hp