The Federal Housing Administration (FHA) unveiled plans Thursday for wider assistance to troubled borrowers of FHA-backed loans, as Congress moved to increase FHA’s lending coffers by nearly one-third. HUD Secretary Shaun Donovan announced the assistance program, which is designed to parallel the Obama Administration’s current “Making Home Affordable” plan. Under the program, beginning Aug. 15, homeowners with FHA loans can apply through their lenders for loan modifications like lower monthly payments. “Today, we’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Donovan said. “This is just the latest tool we are providing to help homeowners prevent foreclosures through the Making Home Affordable program.” The FHA plan will strive to cut monthly payments by utilizing partial claims, in which principal payments are deferred through a subordinated interest-only lien. Mortgagees under the new plan are eligible for up to $1,250 of incentives, including $500 for partial claims and $750 for loan modifications.

In return, they must agree to waive all late fees and cover the cost of a borrower credit report. In a separate move, the House voted 363-68 Wednesday to approve a bill that will fund certain federal assistance programs while Congress is out of session for its summer break. The bill’s provisions include an expansion of FHA’s lending ceiling to $400 billion from its current cap of $315 billion. Authorities had grown concerned that FHA-whose lending insurance has grown more critical to new borrowers since the demise of the subprime industry-was dangerously close to exhausting its Congressional allowance, with $59 billion in the fund and current monthly lending volumes of $33 billion. The measure was applauded by representatives of both parties as a key source of assistance for those hit hardest by the economic downturn. “If we fail to act today, our people, our states and our economy will be harmed,” Rep. John Lewis, D-Ga, told The Associated Press.