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The Federal Reserve has finally issued a plan that is not just targeted at saving the banks but pushing the support down to the homeowners affected by the foreclosure crisis.

Under the plan, 9.9 billion will be issued to 6 banks for loan modifications. The banks will then use this money to help borrowers get their payments down to 38 percent of their income and hopefully keep their homes out of foreclosure.

But if you are in trouble and your loan is not with Chase Home Finance LLC, Wells Fargo Bank NA, CitiMortgage Inc., GMAC Mortgage Inc., Saxon Mortgage Services Inc. or Select Portfolio Servicing, this plan will not help you.

Another instance of the rich getting richer and the small getting forced out through government intervention. But that is the topic of a future post.

Under the plan unveiled by the Obama administration last month, Chase could get more than one-third of the $9.9 billion. It has been allotted up to $3.6 billion for loan-modification incentives. Wells Fargo has been allotted $2.87 billion and CitiMortgage was allotted $2.07 billion. GMAC has been allotted $633 million, Saxon $407 million and Select Portfolio $376 million. The figures are based on each companies’ volume of business, a senior Treasury official said.

The payments to servicers wouldn’t kick in until a modified loan survives a 90-day trial period. The earliest servicers could expect to begin receiving incentive payments is June.

The loan-modification effort calls for the government to pay servicers a $1,000 one-time fee to reduce borrowers’ payments to 38% of their income for five years. The government would then match the cost of further interest-rate reductions or other measures intended to bring mortgage payments down to 31% of borrowers’ income. The government would pay servicers as much as $1,000 a year for as many as three years if borrowers stay in the program.  WSJ.com.

Related posts:

1. Frustration With Mortgage Servicers Enters The Courts
2. Federal Government Mortgage Bailout Off To Slow Start
3. Couple Accused of California Loan Modification Fraud Arrested in Canada
4. South Carolina Blocks Foreclosures Until Housing Plan Enacted
5. How Will Fannie and Freddie Deal With The Second Mortgages?