The program didn’t work because it forced lenders to sell short with no chance of an upside, says Tom Kelly, a spokesman for JP Morgan Chase.

The new version of Hope sweetens the pot by paying lenders $1,000 for every Hope-refinanced loan and easing the amount they have to write off by allowing loans of up to 93 percent of the market value.

But the most important change is that it allows the U.S. Department of Housing and Urban Development, FHA’s parent agency, to share home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued.

This bill originally included cramdown legislation that would have allowed bankruptcy judges to modify the first mortgage, but that portion of the legislation was defeated in the Senate.

Source: CNNMoney, Les Christie (05/20/2009)