Obama Unveils Mortgage-Relief Plan
MICHELE NORRIS, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
And we begin this hour with the collapse of the housing sector. It kicked off the overall economic crisis. We hear about President Obama's sweeping plan to bring relief to homeowners and, in a few minutes, from a mortgage counselor who has already been working hard to do just that. The Obama plan calls for $75 billion to help restructure millions of at-risk home loans. The plan would also enable millions of homeowners, who are not in danger of default, to refinance into cheaper loans. The president says that should help as many as 9 million households as well as their surrounding communities and the broader economy.
NPR's Scott Horsley has more on this.
SCOTT HORSLEY: President Obama outlined his plan in the Phoenix suburb of Mesa, Arizona, a community that grew rapidly as the housing bubble inflated, then wound up with financial gum on its face once the bubble popped.
P: In Phoenix and its surrounding suburbs, 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.
HORSLEY: The collapse of the housing market, along with the broader economy, has left 150,000 Arizonans at risk of foreclosure, along with millions more around the country. For people who can no longer afford their mortgage, Mr. Obama wants lenders to reduce the monthly payments to just 31 percent of a borrower's income. Banks getting bailout funds from the government are obligated to go along. Mr. Obama says other lenders could also find it's worth their while, thanks to new government incentives.
P: If lenders and home buyers work together, and the lender agrees to offer rates that the borrower can afford, then we'll make up part of the gap between what the old payments were and what the new payments will be.
HORSLEY: The $75 billion price tag of the program is even bigger than the administration originally promised. Sheila Bayer, who chairs the Federal Deposit Insurance Corporation, said it's good to see real resources committed to bringing reluctant lenders into the fold.
NORRIS: You know, it would be nice if it happened voluntarily. We tried voluntary; it didn't work, and we are woefully behind the curve.
HORSLEY: A second piece of the Obama plan is aimed at homeowners who can pay their mortgage, but who would still benefit from refinancing at today's lower interest rates. Many homeowners have been ineligible to refinance because falling home values have left them without the required 20 percent home equity. HUD Secretary Shaun Donovan says relaxing that requirement will allow millions more families to refinance, saving the typical household more than $2,000 a year.
NORRIS: Let me be clear, these families have played by the rules. They're families that only have been victims of their houses falling in value. And therefore, their mortgages are close to or higher than the value of their homes today.
HORSLEY: Playing by the rules is an important mantra for the administration, which is already drawing criticism from some congressional Republicans that its plan rewards irresponsibility. Mr. Obama took pains to say he's only trying to help well-intentioned homeowners, not speculators or those who knowingly bought more house than they could afford.
For people who are paying their own mortgage and wonder why they should help their neighbor pay his, Mr. Obama stressed that everyone would pay a higher price if the mortgage crisis deepens.
P: And we're not just helping homeowners at risk of falling over the edge, we're preventing their neighbors from being pulled over that edge, too, as defaults and foreclosures contribute to sinking home values and failing local businesses and lost jobs.
HORSLEY: The government says it should have a standard procedure for restructuring mortgages in place by early next month. Meanwhile, the Treasury Department is promising new support for mortgage giants Fannie Mae and Freddie Mac in an effort to prop up the housing market and keep mortgage rates at historically low levels for everyone.
Scott Horsley, NPR News, Mesa, Arizona.