Obama Plan To Cut Some Borrowers' Mortgage Debt
The Obama administration will announce a plan to reduce the amount some unemployed borrowers owe on their home loans. Robert Siegel talks to Washington Post reporter Renae Merle about the plan, which the administration is scheduled to announce on Friday.
ROBERT SIEGEL, host:
Youre listening to ALL THINGS CONSIDERED from NPR News.
For some homeowners having trouble making mortgage payments, help could be on the way. The Obama administration plans to announce several major new initiatives to help borrowers who are unemployed or who are underwater on a mortgage.
For more on this, were joined by Washington Post reporter Renae Merle. Welcome to the program.
Ms. RENAE MERLE (Washington Post): Thank you.
SIEGEL: And first, what is the White House plan and which homeowners would it help?
Ms. MERLE: Well, there are really several different initiatives covered under this plan, but there two major things theyre trying to address. One, that a lot of homeowners that are unemployed they make up a growing number of the people who are in trouble on their mortgage have not been able to qualify for mortgage relief plans so far because they have little or no income.
So, under this plan, lenders will be required, if they were part of the making home affordable program, the better foreclosure prevention program, to give borrowers forebearance. Basically, the borrower would have their mortgage payments slashed to 31 percent or less of their income or stopped for a period of three to six months.
SIEGEL: Thats if theyre unemployed?
Ms. MERLE: Thats if theyre unemployed.
SIEGEL: Now, what if theyre working but theyre underwater, the house is now worth less than what they owe on the mortgage?
Ms. MERLE: Then theres several different initiatives that theyre rolling out to address that. One, if youre underwater on your mortgage but youre current, youre still making all your mortgage payments, you may be able to refinance into a loan backed by the FHA. Under this program, the lender would - or the investor would cut the principle owed by the homeowner by at least 10 percent. So, you would get a principle reduction and you would be refinanced into a new loan. Hopefully you would get a lower interest rate and your mortgage balance would be closer to the true value of your home.
SIEGEL: Now, for this to really help people, it would have to take effect very soon, I should think.
Ms. MERLE: It would have to well, this is going to actually take a little bit of time to get this all implemented. This is going to be very complicated for the industry to implement. Theyre going to have to change their computer systems, do some training and just really its going to take some time for them to completely understand all of this. So, I dont expect the program to be fully up and ready until the fall.
SIEGEL: And can the administration, can the government tell the lenders to do this?
Ms. MERLE: Thats a little unclear to me. Most of the program is actually voluntary. And the way the administration is trying to get the lenders to do this is theyre increasing the pay-outs, the incentive payments that lenders will be eligible for if they do it.
So, for example, under one scenario, if a borrower whos delinquent, in trouble on their mortgage and theyre underwater, the administration will pay the lender if they cut a portion of the borrowers principle, theyll get some kind of pay-out, maybe 10 cents on the dollar or 20 cents on the dollar for whatever they reduce the principle balance.
SIEGEL: And youre expecting the White House to roll out this proposal tomorrow?
Ms. MERLE: Yes, its scheduled to be rolled out by the White House tomorrow. And obviously this has a lot of different moving parts, so the Department of the Treasury and the Department of HUD will all be involed.
SIEGEL: Okay, thank you, Renae.
Ms. MERLE: Thank you.
SIEGEL: Thats Renae Merle, reporter for the Washington Post.
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