The Federal Housing Administration will be working in tandem with Obama’s Making Home Affordable Plan thereby including the FHA borrowers in mortgage modification. This was announced by Shaun Donovan who is the Secretary of U.S. Housing and Urban Development. It will create a program that will be referred to as FHA-Home Affordable Modification Program. The servicers have been asked to execute the necessary changes by August 15th.

Quoting Shaun Donovan “Today, we’re bringing another important tool to the table to help struggling families who are desperate to keep their homes. Tens of thousands of FHA borrowers will now be able to modify their mortgages in the same manner as so many others who are taking advantage of the administration’s Making Home Affordable program”.

It was a welcome development for many loan servicers as well as mortgage counselors. Despite implementation of Obama’s Making Home Affordable Plan, the FHA borrowers were not being able to enjoy any benefits of mortgage modification. However, with the introduction of this program the FHA borrowers are expected to enjoy benefits of mortgage modification.

The Helping Families Save Their Homes Act, 2009 was signed into a law on 20th May and it enables eligible FHA borrowers to reduce their monthly mortgage payments. As per the new program, the qualifying FHA borrower will be able to enjoy a reduction of 30% on the principal amount owed. And the monthly mortgage payment will not exceed 31% of the borrower’s gross monthly income.

The loan servicers will be paid up to a maximum of USD$1,250 for every mortgage modified. This will be provided by the Federal Housing Administration. The new program that has been introduced for the FHA borrowers is expected to help thousands of borrowers.

According to David Kittle who is the Chairman of Mortgage Bankers Association, “We are excited to have another tool that lenders can use to help borrowers who have the ability and desire to stay in their homes do so”.

There is one drawback of the new program. It fails to account for debts not related to mortgage.