Now, as Congress prepares to authorize the second $350 billion in spending for the program, Democratic leaders are pressing for changes that would expand beyond the banking industry, which has been the primary beneficiary of the program. A House Committee heard testimony Tuesday on revisions that would commit between $40 billion and $100 billion of TARP funds to various foreclosure relief measures.
One proposal would expand an FDIC program aimed at standardizing the loan modification process and paying mortgage servicers a fee for every loan they modify. To cap monthly payments at no more than 31 percent of a borrower’s income, loan servicers could extend the loan to 40 years or defer some interest until the borrower sells or refinances their home. The measure would also provide mortgage servicers some protection against investor lawsuits claiming a loan modification lowered their returns.
The TARP revision also could include changes to the Hope for Homeowners program, which provided $300 billion in guarantees to help lenders refinance troubled borrowers into FHA mortgages. Lenders balked because the program was too costly; changes in the law are expected to make the plan more attractive.
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