The U. S. Department of the Treasury announced today enhancements to its Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs to "assist responsible homeowners who have been affected by the economic crisis through no fault of their own."

"The program modifications will expand flexibility for mortgage servicers and originators to assist more unemployed homeowners and to help more people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values," according to a press release from the department.

"These changes," it continued, "will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP)."

"Our housing initiatives must balance the need to help responsible homeowners struggling to stay in their homes," it said, "with the recognition that we cannot and should not help everyone. The President has said: 'We can't stop every foreclosure.'"

To be eligible for mortgage modification under HAMP, homeowners must "live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship."

The FHA refinance options announced today will provide more opportunities for lenders to restructure loans for some families who owe more than their home is worth. This is a voluntary program for lenders and homeowners. The population eligible for a FHA refinance must be current on their mortgage. This rewards responsible homeowners and creates stabilizing incentives in the housing market.

David Streitfeld wrote today in an article at nytimes.com that "The administration's earlier efforts to stem foreclosures have largely been directed at borrowers who were experiencing financial hardship. But the biggest new initiative, which is also likely to be the most controversial, will involve the government, through the Federal Housing Administration, refinancing loans for borrowers who simply owe more than their houses are worth. About 11 million households, or a fifth of those with mortgages, are in this position, known as being underwater. Some of these borrowers refinanced their houses during the boom and took cash out, leaving them vulnerable when prices declined. Others simply had the misfortune to buy at the peak. Many of these loans have been bundled together and sold to investors. Under the new program, the investors would have to swallow losses, but would probably be assured of getting more in the long run than if the borrowers went into foreclosure. The F.H.A. would insure the new loans against the risk of default. The borrower would once again have a reason to make payments instead of walking away from a property."

Bank of America, the country's biggest bank, announced this week that it would forgive principal balances over a period of years on an initial 45,000 troubled loans.

"A third element of the White House's housing program," the nytimes.com article said, "will require lenders to offer unemployed borrowers a significant reduction in their payments for a minimum of three months. Borrowers will have to be receiving unemployment assistance to qualify."