One day after signing a $787 billion stimulus bill into law, President Barack Obama will outline a $75 billion plan to help stem foreclosures, which is at the heart of the nation’s deepening economic woes.
The goal will be to prevent millions of American families from losing their homes because they can’t make mortgage payments.
“All of us are paying a price for this home mortgage crisis,” Mr. Obama will say of the plan, according to prepared text of remarks released to the Associated Press.
The plan, called the
Homeowner Stability Initiative
, would provide incentives to lenders to cut monthly mortgage payments to sustainable levels. It defines this at no more than 31 percent of homeowners’ income.
Mr. Obama will outline the plan Wednesday at a high school in Mesa, Ariz., one of the states hardest hit by mortgage defaults.
More than 2 million American homeowners faced foreclosure proceedings last year, and that number could reach as high as 10 million in the coming years depending on the severity of the recession, according to a report last month by Credit Suisse.
“In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen,” Mr. Obama plans to say.
The plan will include several elements, reported the Washington Post.
It will encourage lenders to lower borrowers’ payments to affordable levels, perhaps through the government subsidizing lower interest rates. It also will establish industry standards for modifying troubled loans, which could include extending the terms of loans or giving borrowers a short-term break on payments.
Homeowners would also be allowed to refinance their mortgages if they owe more than their homes are valued, reported the AP, and bankruptcy judges would be given more authority to change mortgages.
An official, speaking on the condition of anonymity, also told the AP that the Obama administration will use Fannie Mae and Freddie Mac to help prevent borrowers from defaulting on their mortgages.
The administration, reported the Washington Post, also focused on developing a plan that would not put too much taxpayer money at stake, supplanting previous government foreclosure prevention efforts that have fallen short.
As part of the housing rescue plan the Treasury Department would double its financial support for housing finance giants Fannie Mae and Freddie Mac, allowing them to play a bigger role supporting housing as part of a fresh foreclosure mitigation plan, according to Reuters.
The Treasury said it was increasing its preferred stock purchase agreements with the two government-controlled companies to $200 billion each from $100 billion. It also said it was raising the limit on the size of the mortgage portfolios the two companies can hold by $50 billion to $900 billion each, along with a corresponding increase in their allowable debt outstanding.
This story compiled from numerous sources on the web.
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