About 200,000 mortgage modifications have been worked out under the government's Home Affordable Modification Program, including 40,000 modification offers completed in a single week this month, Shaun Donovan, secretary of the Department of Housing and Urban Development, said last week.

"We've made substantial progress in a short period," Donovan said at the National Association of Real Estate Editors conference in Washington.

Donovan said the foreclosure-prevention program has already gotten more results than previous government efforts to address the foreclosure problem and that the pace of modifications is rising.

"We're beginning to get to a pace that will get to millions of modifications," he said.

A key element of the new plan is to make mortgages "truly affordable" with the modification, he said. Under the program, the standard is a 31% debt-to-income ratio, he said; the HAMP program's Web site says a borrower's modified mortgage payment should be no more than 31% of his or her monthly gross income.

The plan also has a refinance program designed for homeowners who are on time with their payments but are unable to take advantage of low mortgage rates because they owe more than their home's current market value. To be eligible for this program, the borrower's loan-to-value ratio can be no higher than 105%, but James B. Lockhart 3rd, the director of the Federal Housing Finance Agency, said at the conference that raising the limit is being discussed.

He declined to say what a new loan-to-value limit might be but said that loans with a 125% loan-to-value ratio could be sold into special pools known as Real Estate Mortgage Investment Conduits.

Lockhart said Fannie and Freddie were barred by their charter from engaging in "warehouse" lending, which nonbank mortgage lenders rely on for capital to make fresh loans.

Lockhart said Fannie Mae and Freddie Mac could help lenders by agreeing up-front to buy loans before they are originated.

Donovan reiterated the administration's position that not every foreclosure can be prevented. Part of the foreclosure-prevention plan has been to encourage alternatives for families destined to lose their homes, such as short sales.

Though not everyone can be helped, Donovan said, not addressing the foreclosure problem would be akin to letting a house burn down and ignite an entire neighborhood. The administration believed that letting foreclosures continue at last winter's pace "wasn't going to lead to a bottom, it would lead to a much more substantial decline than otherwise," he said, as foreclosures eroded values of adjacent properties.

Donovan also looked to the future of mortgage lending, voicing support for President Obama's proposed sweeping changes in the banking industry's regulatory structure.

The reforms would also introduce more fairness into lending, including rules to ensure that borrowers can afford their mortgages, he added. And those in the mortgage industry would have a greater interest in a loan's success because they would retain a portion of the credit risk at origination, he said.

"No longer will homeowners and investors be the only ones with skin in the game," Donovan said.

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