The Treasury Department late Friday unveiled a new plan to expand the Home Affordable Modification Program (HAMP) by increasing the incentive fees it pays investors including Fannie Mae and Freddie Mac for agreeing to reduce the principal amount of a mortgage.

Treasury notified the Federal Housing Finance Agency (FHFA) that it will pay principal reduction incentives to Fannie Mae and Freddie Mac “if they allow servicers to forgive principal in conjunction with a HAMP modification,” according to Treasury assistant secretary Timothy Massad.

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