President Obama, calling the housing meltdown a "crisis unlike we've ever known," rolled out a $75 billion plan Wednesday that his administration hopes will keep as many as 9 million families in their homes.
The announcement in Phoenix comes a day after he signed a $787 billion economic rescue package that combines spending and tax cuts aimed at saving and creating millions of jobs.
The foreclosure prevention plan is more ambitious than initially expected -- and more expensive. It aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure.
Obama said the plan is a critical component in his administration's efforts to pull the nation out of recession.
"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 continue to deepen -- a crisis which is unraveling homeownership, the middle class, and the American dream itself," Obama said. "But if we act boldly and swiftly to arrest this downward spiral, then every American will benefit."
The plan would draw $50 billion from existing financial bailout money, as well as $25 billion from government-backed entities like Fannie Mae and Freddie Mac.
Part of the program would instruct Fannie and Freddie to automatically approve refinancing at current rates. That change is expected to give 4-5 million people an immediate reduction in their mortgage payments, according to a senior administration official.
Another component would provide government incentives to modify at-risk mortgages to drive down payments.Lenders would be asked to reduce monthly payments to 38 percent of the borrower's income, and then the government would split the cost of reducing that to 31 percent.
Obama said the funding would not reward "unscrupulous or irresponsible" speculators.
"This plan will not save every home," he said. "But it will give millions of families resigned to financial ruin a chance to rebuild."
Obama said the goal is to target families who are "underwater or close to it" and help those who "played by the rules and acted responsibly."
The goal of the overall plan is to save 7 to 9 million mortgages.
Announcing his plan in a state hard hit by the housing crunch, Obama said that stemming the tide of foreclosures is key to turning around the recession-bound economy.
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3 comments:
Stop rewarding bad decisions! This is insane, I saved for my home, I didn't go on that expensive vacation, I didn't buy an expensive car, I saved for a rainy day and did not live beyond my means! I paid off my home and now because of people who bought homes beyond their means, my home value has sunk $125k in one year! My neighbor who is struggling and had nothing in savings for a "rainy" day and drives brand new cars gets a reduced interest rate and a reduced mortgage because of the falling home values, and he gets a "credit" for paying his bill on time?? What about me?? Didn't I do what we all want, the "American Dream"? Has anyone else had enough of this?? And for those of you that may think my life must have been easy, I was a mother at 19 which was MY bad decision, and guess what? I never took a handout from the governement, I never received wellfare or food stamps, I married at 19 and raised 2 beautiful daughters who are both now in college for which I pay for as well. My husband and I worked very hard to get where we are, we owned a small business, and believe me, we have paid a lot more in taxes than most people. Where in the heck is our reward? It's not that I want a reward, I just want people to see that we can't keep giving to people who don't deserve it, (of course, there are people who do really deserve help, of which I am all for) but for most that I see getting help we are just "raising" spoilled, rotten, lazy americans
I wonder how the mortage adjusted, in total, to arrive at the 31% of the borrowers income. There are a few things that come to mind - the mortgage fluctuates over time as the borrowers income changes. Also, will this involve principle adjustment, payment adjustment, number of payments, years, balloons. Orignal mortage principle of say $500,000 reduced to an amount that is equal to 31% of the borrowers income or perhaps the $500,000 is reduced to reflect a current depressed market value of maybe $300,000 and then the payment made equal to 31%. Another way to slice and dice - $500,000 reduced to a value equal to 31% times number of payments. Another example - one old mortage of $500,000 ($200,000 current value) will be $150/month for one borrower (based on income) and maybe $450/month for another (based on income). I wonder if taxpayers ever recoup these money adjustments. There are a lot of people paying mortgages for years that never got such a gift. my opinions.
We are continuing down the road of reliance on government and not self-reliance. We continue to move toward a situation where the responsible will pay for the irresponsible. If the government becomes the savior and decision maker the republic is lost - socialism begins. Soon there will not be enough responsible people left to aid those who made poor decisions. Don't get me wrong, there are a lot good hard working people who lost their jobs and are struggling. I have no problem helping them; that's what Americans do, we help each other. We should not, however, rely on government for this help. With respect to housing, history has shown that housing prices rise. Eventually, all those who are upside down will be right side up. If the government rewrites the mortgage to lower the value, that money is lost. Will the government rewrite the mortgage to raise the value when the market improves. Lower the fixed rate to decrease the payment but not the principal. In the end it comes down to a simple question who do you want to control your life. In the end if people are not held accountable for their actions, their actions will never improve.
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