Obama's Foreclosure Plan

The White House has released an executive summary of the Homeowner Affordability and Stability Plan — the Main Street bailout that President Obama slated to speak about today in Arizona. Take a gander and report back in the comments, please.

Here's what's catching my eye, at first glance:

The White House puts these points in their own little box:

— Refinancing for up to 5 million homeowners.
— $75 billion to help up to 4 million folks at risk of foreclosure.
— "Supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.

For Main Street, the general gist seems to be lowering people's monthly mortgage payments. The Homeowner Stability Initiative gets this pitch:

For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower's monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.

The summary says lenders get $1,000 up-front for each mortgage they modify under the program, then up to $1,000 each year for three years if the borrower stays current. Homeowners in good standing under the program can have their principal balance reduced by $1,000 a year for five years.

Ah, some big money — the government is upping its role in Fannie and Freddie, part of its bid to "strengthen confidence" in the mortgage companies. "Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each," the release says. Treasury will keep buying mortgage-backed securities from the two.

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