NEW YORK (CNNMoney) -- The Obama administration is taking another swing at improving its main foreclosure prevention program.
The administration said it was expanding eligibility for its Home Affordable Modification Program, known as HAMP, to borrowers with higher debt loads and tripling the incentives it pays banks that reduce principal on loans.
The administration also said it would offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans. Previously, the government had only offered incentives to private lenders and banks. The program was also extended to December 2013. It was initially set to expire at the end of this year.
The changes were announced in a joint press conference held by Housing and Urban Development Secretary Shaun Donovan, Assistant Treasury Secretary Tim Massad, and White House National Economic Council Director Gene Sperling on Friday afternoon.
Originally designed to help some 4 million mortgage borrowers when it was first introduced in February, 2009, HAMP has helped fewer than 1 million homeowners.
With these changes, HAMP is turning into an "all of the above strategy to help responsible homeowners lower their costs and stay in their homes," said Gene Sperling, the Director of the National Economic Council, who also took part in the press conference.
Here's a rundown of the new changes:
While the new changes could greatly expand the number of homeowners that receive help from HAMP, it could invite controversy. Subsidizing real estate investors with taxpayer money in a time of rising rents doesn't makes much sense to Anthony Sanders, a real estate professor at George Mason University, for example.
Yet, HUD Secretary Shaun Donovan said that it doesn't matter whether the house next door to you is occupied by a tenant or an owner.
"If the house goes vacant, the value of your house goes down $5,000 or $10,000 that day," he said. "These are major problems for homeowners."
Following the press conference, the Federal Housing Finance Agency, which oversees Fannie and Freddie, issued a statement that said it would consider the changes to the HAMP program.
However, it noted that an analysis it recently conducted found "that principal forgiveness did not provide benefits that were greater than principal forbearance," signaling that the housing authority may not support reducing the principal on loans as a way to help homeowners.
No new funds need be allocated for HAMP's expansion. Since less than $10 billion of the $29 billion set aside for the program has been spent so far, said Timothy Massad, Assistant Secretary for Financial Stability at the Treasury Department. The administration would not hazard a guess at how many more borrowers the expanded program would help.
The changes in HAMP do not take effect until the end of April, but a Treasury spokeswoman said any struggling homeowners should reach out and seek foreclosure prevention counseling immediately. That way, they can learn their options, which could include trying to hold on until the new HAMP is ready.
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