(CEP News) - The U.S. mortgages modification program will only apply on conventional mortgages which are owner occupied, primary residences, according to additional details released by the Treasury Department on Wednesday.

The program announced last week aims to alleviate the terms of over 7 million homeowners in the United States through smaller payments and debt reduction by banks.

“It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive,” said Treasury Secretary Tim Geithner in the Treasury Department’s press release. “Economic recovery requires action on all three fronts.”

Lenders will have to reduce mortgage payments to no more than 38% of the Front-End Debt-to-Income (DTI) ratio after which the government will match additional reduction to 31% of this ratio.

The program also includes reduction on principal for mortgage borrowers who make their payments on time, as well as incentives for lenders to participate in the program.

Last week the Treasury also announced intentions to broaden portfolios on Fannie Mae and Freddie Mac.

By Erik Kevin Franco, efranco@economicnews.ca

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Posted in Categories: Economy, Eurozone, Housing, Releases, USA.

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