This is a great article that I came across today at Bloomberg.com - The FED’s Troubled Asset Relief Program looks like it’s taken a big step today toward preventing “avoidable foreclosures”.

The Fed “Draws the Line” with this program adopting the FDIC modification guidelines which are much more strict than most troubled homeowners would like to see.

Once the definition of “avoidable foreclosure” is set in stone, which is what they are appearing to do here, my opinion is that we will begin to see a rather significant shift in universal policy from lenders wishing to participate in the government’s TARP plan.

Here is a copy of the article as it appeared on Bloomberg today:

Jan. 27 (Bloomberg) — The Federal Reserve will ease terms on residential mortgages acquired in the rescues of Bear Stearns Cos. and American International Group Inc., seeking to stem foreclosures.

The Fed policy is targeting borrowers who are 60 days or more overdue on loan payments and covers modifications of interest rates and payment plans. The program uses the Fed’s authority in the $700 billion Troubled Asset Relief Program and was released today by the House Financial Services Committee.

“It reflects the understandable desire of the Federal Reserve to have some cooperation” with the Obama administration, House Financial Services Committee Chairman Barney Frank told reporters today in Washington. “This is a very big deal.”

Frank, a Massachusetts Democrat, and other leaders in Congress have criticized the Treasury for failing to act on the foreclosure-relief provisions in the TARP law Congress approved in October. This month, Congress released the remaining $350 billion in rescue funds to the Obama administration.

“The goal of this policy is to avoid preventable foreclosures on such assets through sustainable loan modifications and other actions that are consistent with the Federal Reserve’s obligation to maximize the net present value of the assets for the benefit of taxpayers,” according to the document.

The Fed’s “Homeownership Preservation Policy” lets the central bank or its agents “promptly” review applicable mortgages to determine whether the borrowers should be offered a loan modification, the document said. Qualified borrowers must be at least 60 days late on their payments.

Modifications

Modifications will include cutting the interest rates, extending the loan terms, and deferring or reducing the outstanding principal balance, the Fed said.

The policy applies to the residential-mortgage assets the Fed acquired in its rescues of Bear Stearns in March and AIG in September.

The Fed will distinguish between loans in which the central bank may hold only a fractional interest along with other investors, the Fed said. It will encourage the servicers of those residential mortgage-backed securities “to implement a loan-modification program that is consistent with this policy,” according to the document.

“Treasury and Federal Reserve know that they are going to need more” than $350 billion, Frank said. “They also understand that they will not get any further authority for any kind of intervention if they don’t build up some political support.”

Fed Chairman Ben S. Bernanke will appear at a committee hearing on Feb. 10, Frank said, adding he plans to meet with Bernanke on Feb. 2.

“I’m very pleased that the Fed is stepping up,” Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, told reporters today about the Fed’s policy.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net;

For additional information about the FDIC guidelines and valuable research tools that may assist you in better understanding your specific options - visit www.helpUmodify.org You will find many self help options available to you as well as third party assistance services if that turns out to be the next step in your attempts for avoiding preventable foreclosure.