For At-Risk Borrowers, the Night before Christmas

Homeowners at risk for foreclosure may receive a belated TARP gift Wednesday afternoon: a partially-subsidized mortgage payment, with best wishes, from Uncle Sam. The homeowner relief plan — or foreclosure prevention plan — is scheduled to be released by President Barack Obama in detail Wednesday after months of public criticism that the Treasury Department‘s Troubled Asset Relief Program had strayed too far from its original goal and had forgotten the everyday homeowners in need of aid. The plan, which will be funded with at least $50 billion of the remaining TARP funds, is said to target borrowers not yet in arrears but at risk of becoming so. Unnamed sources late last week told Reuters the plan involves a reappraisal of homes for value and affordability, as part of an examination of homeowners to determine eligibility for the subsidy program. Sources also told Reuters that homeowners would not need to prove hardship to qualify for the program, which would subsidize lenders that lower monthly payments to within 31 percent of a borrower’s net income. If the subsidized payment and reappraisal make it into the mortgage relief plan that will be unveiled Wednesday, it would mark a stark turnaround from popular loan modification programs that chase after foreclosures rather than stepping out in front of them and catching troubled borrowers before they ever set foot near the foreclosure process. It would also mean the Treasury would finally be addressing the housing crisis where it happens — in the budget of the homeowner current on payments but that has lost a job, whose mortgage payment has increased or who simply purchased more home than they could afford — after months of the TARP’s trickle-down operations in the broader financial markets that, so far, has had little bearing on the everyday homeowner. Buzz about Wednesday’s announcement comes as Obama is scheduled to sign the $787 billion economic stimulus package on Tuesday in Colorado. The bill passed a Congress vote late Friday and, as expected, focuses heavily on government spending initiatives to stimulate job growth, as well as a handful of tax breaks, including an $8,000 tax credit to all first-time home buyers that purchase before year-end. Write to Diana Golobay at

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