Obama To Unveil Foreclosure Solution

President Barack Obama unveils a plan Wednesday in Arizona to help end the housing crisis and fight foreclosures. The state has one of the highest foreclosure rates in the country. Nationwide, more than 2.3 million homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007.

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It's not surprise that President Obama picked Arizona to announce his $50 billion plan to help homeowners. The state has one of the highest foreclosure rates in the nation. And when the president speaks in the Phoenix suburb of Mesa later today, many Arizona residents will listen closely, as NPR's Ted Robbins found out.

TED ROBBINS: If the president wants to reach the people dealing with the foreclosure crisis up close, he could come to the Tucson community food bank and walk upstairs to the regular Tuesday night workshop held by a local nonprofit counseling agency.

Ms. YESINIA LOPEZ(ph) (Counselor): What is a budget? It's an itemized summary of expenses and income for a given period of time.

ROBBINS: Yesinia Lopez talks about cutting expenses to pay the mortgages while a dozen homeowners - English and Spanish speakers - sit around tables eating snacks to hold them over 'til dinner. These folks don't want to join the 117,000 Arizona property owners who got foreclosures notices last year. But to save them, workshop leader Daniel Mendez says counselors like him need more effective tools.

Mr. DANIEL MENDEZ (Workshop Leader): We've been given this task to help homeowners and we were kind of asked, like, to help the sinking ship. And here's your boat but there's no paddles.

ROBBINS: First, Mendez says he wants President Obama to fix the current government program to help homeowners restructure mortgages. It's voluntary and lenders aren't using it.

Mr. MENDEZ: So, I'm hoping that the Treasury, the Fed and the president will put more pressure on lenders to actually participate in that program.

ROBBINS: If lenders won't cooperate, Mendez hopes President Obama gives bankruptcy judges the authority to restructure mortgages.

Mr. MENDEZ: But if you recall, bankruptcy laws were only changed in '05. So prior to that, you could file for bankruptcy and get your loan modified.

ROBBINS: Both ideas have been kicked around Washington and are expected to be part of the president's plan. For Cheryl Russ(ph), a homeowner at the workshop, it's all about communication. She says her adjustable rate interest-only mortgage is now worth more than her house. She's been trying to get her lender, Countrywide, to refinance since December.

Ms. CHERYL RUSS (Homeowner): I told them, I'm not going to be able to make my payment in February. I know this now. And they still won't talk to me. They are not required to talk to us until we are at least two payments behind.

ROBBINS: Cheryl Russ works as an insurance agent; her husband is a truck driver when he can find work. She wants her lender to recognize she's trying to the right thing.

Ms. RUSS: Tell them they have to talk to me before I go into default. I don't want to go into default.

ROBBINS: She says she and her husband were told their initial low interest rate wouldn't reset for five years. Instead, it reset after five months. So, the final thing they and the counselors here hope the president announces is that he'll outlaw the kind of loans that got homeowners and lenders into this mess.

Ted Robbins, NPR News, Tucson.

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Obama Sets $75 Billion Plan To Stem Foreclosures

President Obama discusses his plan to deal with the home mortgage crisis. i i

hide captionPresident Obama discusses his plan to deal with the home mortgage crisis Wednesday in a speech in Mesa, Ariz.

Jim Watson/AFP/Getty Images
President Obama discusses his plan to deal with the home mortgage crisis.

President Obama discusses his plan to deal with the home mortgage crisis Wednesday in a speech in Mesa, Ariz.

Jim Watson/AFP/Getty Images

In Depth

The Obama administration says its mortgage-assistance program could help up to 9 million families. But analysts say the plan has potential problems and won't necessarily help all homeowners.

Obama's Plan

Following are highlights of President Obama's plan to reduce mortgage foreclosures.

  • Allow an estimated 4 million to 5 million currently ineligible homeowners who get their mortgages through Fannie Mae or Freddie Mac to refinance at lower rates.
  • Create incentives for lenders to work with borrowers to modify the terms of subprime loans at risk of default and foreclosure.
  • Take "major steps" to keep mortgage rates low for millions of middle-class families seeking new mortgages.
  • Pursue reforms designed to help families avoid foreclosure, including allowing bankruptcy judges to reduce mortgages on primary residences to their fair market value.

Source: The White House

Graphic: Tracking Foreclosure Filings i i
Graphic: Tracking Foreclosure Filings

President Obama on Wednesday unveiled an aggressive plan that aims to help up to 9 million homeowners avoid foreclosure, a major cause of the nation's financial crisis.

The president announced details of the plan in a speech in suburban Phoenix, where massive foreclosures drove down the median price of an existing home to $136,000 last month — a 49 percent drop from 2006, according to The Arizona Republic.

The plan is designed to help homeowners whose mortgages exceed the value of their home and those who are on the verge of foreclosure. It includes $75 billion to cut the home payments of some homeowners and $200 billion from the Treasury Department to purchase preferred stock in Fannie Mae and Freddie Mac — double what was originally pledged.

"Through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can avoid foreclosure," Obama said in remarks to a crowd at a Mesa, Ariz., high school. "And we are not just helping homeowners at risk of falling over the edge; we are preventing their neighbors from being pulled over that edge too — as defaults and foreclosures contribute to sinking home values, failing local businesses, and lost jobs."

The announcement came shortly after the Commerce Department released even more bad news about the housing market. The government report showed that housing starts fell nearly 17 percent in January to a seasonally adjusted annual rate of 466,000 units, a record low. Applications for building permits, an indicator of future activity, also dropped.

The president's initiative calls for allowing 4 million to 5 million ineligible homeowners with mortgages through Fannie Mae or Freddie Mac to refinance their home loans at lower rates. To accomplish this, Obama said he would remove restrictions that prevent Fannie and Freddie from refinancing mortgages valued at more than 80 percent of a home's worth.

Housing Secretary Shaun Donovan stressed that homeowners don't need to be delinquent in payments to get help.

The plan also offers financial incentives for lenders to reduce the mortgage payments of as many as 4 million homeowners who are at risk of losing their homes. Under the $75 billion Homeowner Stability Initiative, lenders would cut mortgage payments to no more than 31 percent of the borrower's income.

"My plan establishes clear guidelines for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines — which will be in place two weeks from today," Obama said.

The plan is designed to aid homeowners and entire communities where double-digit foreclosure rates have led to declining properties and a shrinking tax base. Last year, there were nearly 3.2 million foreclosure filings — including default notices, auction sale notices and bank repossessions — on more than 2.3 million properties during 2008, an 81 percent increase in total properties from 2007, according to RealtyTrac, which tracks foreclosures.

The president stressed that the plan would not rescue speculators who made risky investments on homes to resell, dishonest lenders who distorted facts to get loans approved, or people who bought homes they knew they could not afford.

In addition, the Treasury Department announced it would provide up to $200 billion to Fannie Mae and Freddie Mac to stabilize the markets and hold down mortgage rates. In 2008, almost three-quarters of new home loans were financed or guaranteed by Fannie Mae and Freddie Mac.

"The increased funding will provide forward-looking confidence in the mortgage market and enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners," said a Treasury Department statement.

The president announced his housing initiative just one day after he signed a $787 billion economic stimulus plan that aims to create or save 3.5 million jobs. On Wednesday, he said part of the economic stimulus included $2 billion in competitive grants to communities looking for innovative ways to avoid foreclosures.

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