Freddie & Fannie

The Obama administration's new mortgage relief plan, launched Wednesday, aims to help up to 9 million borrowers qualify for more affordable mortgages and stay in their homes.

It has two parts: First, it makes refinancing easier for those who are able to make their payments but pay a high interest rate and would otherwise not qualify because they do not have enough equity. Second, it encourages lenders to make loan modifications by providing $75 billion in incentives to alter the terms of loans.

Who qualifies?

For the refinance plan: Borrowers with mortgages backed by Fannie Mae and Freddie Mac — generally, those with loans of less than $417,000 — who are current on their payments and who owe no more than 105 percent of the current value of their home, and no less than 80 percent. (That means a homeowner whose home is worth $400,000 only qualifies if her loan balance is between $420,000 and $360,000.)

For the loan modification program: Borrowers with loans of up to $729,750 who are having difficulty paying their mortgage. Reasons for the difficulty, the government says, can include a drop in income from the loss of a job, a medical hardship, or a spike in the mortgage payment. Applicants will be required to document their income and provide an "affidavit of financial hardship," which the government will verify.

How will loans be modified?

Lenders will change the terms of the loan so payments, including taxes and insurance, amount to no more than 31 percent of a homeowners' income. They may lower the interest rate to 2 percent, extend the term of the loan to as many as 40 years, or forgive some principal, although it must be repaid if the house is sold. The government will subsidize some of the cost and provide cash payments to banks as an incentive to work with borrowers.

Not everyone who has a hardship will qualify. Banks will determine whether it makes financial sense to modify a loan.

---------- Government largess to the little people? No, it's politicians funneling money to Fannie Mae and Freddie Mac. The banks will determine which loans make sense to modify. The same banks who thought it made financial sense to make the loans in the first place. I guess the Bush administration's bailout last year was insufficient. Keep throwing bad money after bad money.