White House Set to Announce New Modification Effort

The Obama administration is set to announce a new program to help troubled borrowers whose mortgages are deemed ineligible for modification. "Maybe this week but certainly next week," said Laurie Maggiano of the Treasury Department's Office of Homeownership Preservation. Speaking at the Mortgage Bankers Association's annual convention, Ms. Maggiano said Treasury would set out the parameters under which servicers can earn financial incentives if they offer borrowers the option of participating in a short sale and deed in lieu of foreclosure. "There's really no magic. We haven't reinvented the wheel," Ms. Maggiano told industry executives in San Diego. To cut down on the paperwork, the program will provide a standardized set of forms. It will also cap the amount of money that can be paid to subordinate lien holders who agree to waive their interest in a property. The government expects that some second mortgage investors will "walk away" from the program because the compensation being offered will be too little. But Ms. Maggiano, who is director of policy in the preservation office, told a standing room only session that by setting a limit, the White House is hoping to eliminate time consuming back-and-forth negotiations between servicers, borrowers and investors. "We are hoping to set an industry standard so investors will know exactly what they can expect," she said.