The Treasury Department has expanded its loan modification program and is now offering incentives for short sales and insurance to “partially offset” price declines on loan modifications during the first two years. The “Home Price Declines Protection incentives are designed to address investor concerns that recent home price declines may persist,” according to a Treasury fact sheet. And it provides cash payments based on average local price declines. The incentives accumulate each month the modified loan is current and payments are made at the end of the 1^st and 2nd year. “It’s just an additional incentive to participate in the program,” Treasury secretary Timothy Geithner told reporters. For distressed homeowners that are eligible for a Home Affordable Modification but can’t keep up with the payments, Treasury is providing incentives for servicers, investors and homeowners to try a short sale or deed-in-lieu if the property is not sold in 90 days. Secretary Geithner noted 14 servicers have signed up for the modification program and they have made modification offers to 55,000 borrowers so far. “This is just the beginning,” the secretary said. Treasury is prepared to expand and improve the program to “reach as many Americans as we can,” he added. Treasury also reported that Fannie Mae has purchased 2,150 Home Affordable Refinance loans so far. The mortgage giant has received over 51,000 eligible mortgage refinance applications where the loan-to-value ratios are between 80% and 105%. Freddie Mac has purchased 1,500 of these refinanced loans that do not require new mortgage insurance.

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