The federal government of United States of America announced a couple of mortgage reduction programs in March 2010. This is yet another effort by the Federal Government to help with monthly loan payments of home owners who find it difficult to meet these payments in time. This plan is an extension and improvement in existing government mortgage help plans, making one wonder whether this program will be effective where others have failed. Let's have a look at the program briefly and identify the target groups.

The Aim Of The Mortgage Reduction Programs Is To Target Two Groups:

• The first group to benefit from government help with mortgages is that of home owners who owe more to the banks as mortgages than the value of their house/property. Some estimates put the number of such households at more than 15 million. Out of the 15 million, 10 million owe more than 20% of the current value of their house.

• The second target group to receive government help with mortgage payments is that of borrowers who are unemployed. They are the main focus group for government mortgage help. The program involves giving lenders incentives to find lower monthly mortgage payments by up to 31% of the borrower's income.

The New Government Help Plans Are:

Home Affordable Refinance

The government will give financial aid to mortgage providers or lending companies so they can give relief to mortgagees by reducing the amount they have to pay. After reducing the amount and making it reflective of the current value of the house, if they still owe to the lending companies they can refinance their loan with aid from the Federal Housing Administration.

In this program, the mortgage can be refinanced into a loan with fixed long term rate (15 to 30 years). The refinancing is available even if the value of the house has reduced and now the amount owed is more than the current value of the house. The new rate takes into consideration the mortgage history and repayment history of the borrower and is reflective of the current rate at the time of refinancing.

Home Affordable Modification

The second mortgage reduction program is targeted at unemployed or low income earners providing them some relief from paying their installments. It can reduce the home owner's monthly repayment to as low as 31% of the owner's monthly income. The Government help with mortgage involves voluntary lender participation initially but once the Government starts paying the lender, participation becomes compulsory. There are no fees in government mortgage reduction programs. The institutions involved in this program (lending institutions) are expected to consider any other loan a borrower may be willing to discuss for this government help.

The cost of living is steadily on the rise and defaults on loans have become a common phenomenon. These mortgage reduction programs of the government aimed at lessening the burden on the homeowners will not only benefit borrowers but also boost the failing housing sector. The previous failure of such attempts of the government to help with mortgage payments may not bode well for these new plans but in the present scenario they do seem like a boon to borrowers who are bending backwards to be able to honor their debts.