The federal foreclosure prevention program has helped about 12 percent of borrowers who applied for help since the plans were announced a year ago, the Treasury Department says.

About 1 million borrowers initiated the application process, and as of January, about 116,000 home owners–12 percent–had their loans modified. But administration officials say another 76,000 applications have been approved and are awaiting signatures.

Another 830,500 home owners are currently in a trial modification review period during which banks make sure payments are feasible for the borrower and ensure the qualifications of the assistance program are met.

For those who qualify, the Home Affordable Modification Program brings monthly loan payments down to 31 percent of home owners’ pre-tax income.

Nearly 60,500 people have been denied permanent modifications.

The Treasury Department on Wednesday expanded its foreclosure prevention plan, lifting the current 105 percent loan-to-value cap to refinance up to 125 percent of a home’s value.

Applications to refinance mortgages have fallen as rates have increased in the last couple of weeks, but this move may bring more borrowers to the table.

At the same time, Fannie Mae and Freddie Mac have agreed to reduce the processing fee for borrowers who select a 25-year mortgage.

Fannie said in a statement, “The reduction is intended to lure borrowers to select shorter terms and build positive equity in their homes sooner than with a typical 30-year mortgage.”

Source: Reuters News, Patrick Rucker (07/01/2009)