Obama Overhauls Failed HAMP Loan Modification Program

It's as good as official: Home Affordable Modification Program, the year-old government program to save homeowners from foreclosure, is a flop.

Today, the Obama administration is set to announce new aid for many homeowners in trouble, who have been beyond help under the limited rules of the old HAMP program.

Using $14 billion more from Troubled Asset Relief Program, or TARP, Treasury for the first time will support reductions of principal that borrowers owe – a crucial step in bringing underwater borrowers back into financial stability. (Ironically, Bank of America beat them to it with a principal reduction program it announced yesterday).

And there's even bigger news in store. The administration may also allow some borrowers who owe more on their mortgages than their homes are worth to refinance into new, smaller mortgages that are based on their actual home values through the Federal Housing Administration.