Chillin' out till it needs to be funded
President Obama unveiled a $275 billion plan yesterday to help as many as 9 million homeowners avoid foreclosure and keep mortgage rates low in the most aggressive effort yet to stabilize the US housing market.
Warning that doing nothing would cost all Americans, Obama presented a three-part plan that contains $75 billion to help modify loans for as many as 4 million struggling homeowners, a change in mortgage rules to help as many as 5 million homeowners refinance into lower-cost loans, and a pledge of $200 billion to bolster mortgage giants Fannie Mae and Freddie Mac.
Housing advocates praised the plan as ambitious, with cash incentives to lenders and borrowers to help stop the bleeding that has left nearly 10 percent of US homeowners either in foreclosure or behind on their mortgages. The plan, which uses federal money that was previously authorized, incorporates many proposals suggested over the past six months as the housing crisis has worsened.
“It’s bold, and the amounts of money they set aside are large and important,” said Barry Zigas, director of Housing Policy for the national advocacy group the Consumer Federation of America. “I hope . . . that it will have a significant impact on the market.”
Obama said the so-called Homeowner Affordability and Stability Plan aims to “arrest the downward spiral” in the housing market that has crippled the US economy and spurred a credit crunch. He said the plan aims to rescue families who have played by the rules but are struggling to save their homes either because their property values plunged or because they bought unmanageable subprime loans.
“In the end, all of us are paying a price for this home mortgage crisis,” Obama said at a high school in the Phoenix suburb of Mesa. “And all of us will pay an even steeper price if we allow this crisis to deepen – a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, then every American will benefit.”