By Carmen Stephens
MESA, ARIZ(AP/UTC)—President Barack Obama unveiled an ambitious $75 billion plan Wednesday to keep as many as 9 million Americans from losing their homes to foreclosures.
The Problem at Hand
Of the nearly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody’s Economy.com. President Obama said, “The American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods,” he said. “While this crisis is vast, it begins just one house and one family at a time.”
The Purpose of the Plan
Obama’s plan aims to keep between 7 million and 9 million people from foreclosure. The $75 billion Homeowner Stability Initiative is designed to provide a set of incentives to mortgage lenders in an effort to convince them to help up to 4 million borrowers on the verge of foreclosure. The goal is to cut monthly mortgage payments to sustainable levels, defined as no more than 31 percent of a homeowner’s income. Funding would come from the $700 billion financial industry bailout passed by Congress last fall.
The plan specifically helps those said to be “under water” — with dwellings whose market value have sunk below the principal still owed on the mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program would help 4 million to 5 million families do just that — if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac. Housing Secretary Shaun Donovan stressed that homeowners don’t need to be delinquent in order to get help. “The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly,” Obama said. “It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans.”
“This plan will not save every home,” President Obama said. He said the plan will not help those who took risky bets by buying homes to sell them, not live in them, or dishonest lenders who distorted facts for naive buyers, or buyers who signed on for loans they knew they could not afford.
Copyright 2009 The Associated Press.