News:

• Obama administration on Friday expanded its main foreclosure prevention program and open it up to loans backed by Fannie Mae and Freddie Mac .
• A joint announcement by U.S. Treasury and Housing and Urban Development dept proposed using money from the Home Affordable Modification Program to provide incentives for Fannie and Freddie to reduce loan principal.
• At present, the $50 bln HAMP program only covers costs for reducing principal on bank-held loans.
• The administration also said it was extending the life of the program till 2013 and would try to reach some borrowers who had been shut out of the program
• FHFA Acting Director Edward DeMarco has said allowing for principal reduction on GSE loans would undercut his mandate to protect the taxpayers
• However, the administration did not specify how much it would pay Fannie and Freddie to participate in HAMP.

Quote

 "To encourage the GSEs to offer this assistance to its underwater borrowers, Treasury has notified the GSE's regulator, FHFA, that it will pay principal reduction incentives to Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification,"

Timothy Massad, Treasury Assistant Secretary