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) -- The

Treasury Department

and the

U.S. Department of Housing and Urban Development

announced Thursday that the government's mortgage modification program will be extended by another two years to Dec. 31, 2015.

The extension of the Home Affordable Modification Program (HAMP) follows a similar extension of the government's Home Affordable Refinance Program (HARP) earlier this year for loans guaranteed by

Fannie Mae


Freddie Mac


"The housing market is gaining steam, but many homeowners are still struggling," said Treasury Secretary Jacob J. Lew. "Helping responsible homeowners avoid foreclosure is part of our wide-ranging efforts to strengthen the middle class, and Making Home Affordable offers homeowners some of the deepest and most dependable assistance available to prevent foreclosure."

Also see: Short Sales Decline Amid Rising Home Prices: RealtyTrac >>

Over 1.1 million borrowers have received a permanent mortgage modification since the program's launch in 2009. That is far short of the Obama Administration's initial target of 4 million modifications.

The program has been criticized in the past for being too restrictive in its relief efforts. While improvements to the HAMP program have been made in recent years, proprietary modifications by banks and non-bank servicers far outpace that of HAMP modifications.

Also see: Mortgage Forgiveness Faces Challenges in Housing Recovery >>

But the government points to data from the Office of the Comptroller of the Currency that shows that borrowers save more on a HAMP modification than on private modifications. The HAMP program also has a lower re-default rate than proprietary modifications, the data shows.

The HAMP program also helped set the standard for modifications in the servicing industry.


lowers the monthly mortgage payment for borrowers in default or struggling to make their payments by lowering the interest rate, extending the term and in some cases reducing the principal on the mortgage. It is available to borrowers who took out a mortgage before Jan. 1, 2009, who can prove financial hardship and who can show sufficient documentation of income.

-- Written by Shanthi Bharatwaj New York.

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