Ahhhh more use of tax payer money....just when you thought they were going to run out of a ideas to prop up housing they do it once again...as I have said numerous times, housing in this country is still overvalued by 40%, the prices are still inflated and being propped up by such programs as these. This time they are opening up the program to Fannie, Freddie and get this, investors in rental properties. US Treasury Forcing Mortgage Principal Forgiveness CNBC.com | January 30, 2012 | 03:43 PM EST Late Friday the U.S. Treasury Department announced a major expansion of its Home Affordable Modification Program (HAMP). The three-year-old program has been largely deemed unsuccessful, as it has provided just about 750,000 borrowers with permanent loan modifications. The initial expectation from government officials was that it would help three to four million borrowers. âClearly the initial program erred on the side of making sure taxpayers were protected, but it didnât do enough to help the overall economy,â said Michael Barr, former Asst. Treasury Secretary for Financial Institutions and one of HAMPâs original architects. Now taxpayers will pony up the cash, as Treasury is tripling the financial incentives to lenders and opening the program up to Fannie Mae, Freddie Mac and investors in rental properties. The money would come out of TARP funds, i.e. from the taxpayers. We still donât know if Fannie and Freddie will participate, since their conservator, the FHFAâs Ed DeMarco, has been actively fighting principal write down for years. A week ago he sent a letter to members of congress explaining the math behind his argument. But the Treasury may be forcing DeMarcoâs hand. He claimed that writing down mortgage principal would cost $4 billion more than the modifications that Fannie and Freddie are doing now. Those involve interest rate reduction and principal forbearance. The newly expanded HAMP, however, with its triple- sized cash incentives, would shore up that $4 billion hole. Funny how he mentioned that hole on Monday, and the Treasury announced the new plan Friday. âIf he [DeMarco] doesnât get to yes, then he has no political leg to stand on,â says FBRâs Ed Mills, who estimates the enhanced program could add one million borrowers to its ranks. Mills says a ânoâ from DeMarco would enable the Obama Administration to replace him, which it tried to do once before, only to be blocked by members of Congress. âIt would be an appropriate response for him to do it,â says Barr of DeMarco. âI do think they should participate.â I asked Barr why the Treasury waited three years to use the TARP funds for principal reduction. The obvious answer is that this is presidential election year, and the housing market is still floundering, but Barr claims the Treasury was just being careful. âItâs a use of taxpayer funds, and you want to make sure youâre not providing more of an incentive than is required,â he said. âOne personâs successful program is another personâs bailout.â