Mortgage lenders, servicers and borrowers are all given incentives under President Barack Obama's $75-billion program to avert further foreclosures. The Treasury Department will also fund Fannie Mae and Freddie Mac, state housing agencies and other entities that will handle major roles in implementing the biggest effort to stop foreclosures since the Great Depression.



The program will be available to troubled homeowners who pass the following requirements: They are living in the homes referred to in the mortgage loans; the homes were not purchased for investment purposes; the mortgages were originated before January 1, 2009; and the loan modifications are processed before the end of 2012.

There is also a limit on the amount of the mortgage loan to be modified. It should not be over $729,750 for single-family houses and should not be over $1.4 million for cooperative condos with up to four units.

Housing specialists predict that mortgage lenders and servicers will modify and refinance millions of borrowers troubled by foreclosures because of the incentives. Lenders will receive a cash incentive of $1,000 for each successful loan modification and an additional $1,000 for each year that the borrower keeps up with payments for up to three years. The borrower will also be helped in reducing the loan balance through a cash incentive of $1,000 each year that the mortgage account is current for up to five years.

The more attractive inducements for mortgage lenders are the incentives to reduce the mortgages rates so that borrowers' monthly payments would not exceed 31 percent of their monthly earnings. Currently, the mortgage rate is hovering just above 5 percent. The lenders are enticed to work out the loans down to 2 percent so that more homeowners could afford payments and more foreclosures would be averted. Lenders that will participate in this program will receive subsidy from the federal government for each borrower that they would save from foreclosures.

If the lenders compare what they lose if they ignore the program and allow their borrowers to go into foreclosures and what they give off if they modify loans, they will see that the loan modification option is better for them and for their investors. The benefits of goodwill are also immeasurable, as they will help millions of American families and children troubled by foreclosures.