OBAMA’S HOUSING PLAN…. The details will, of course, make all the difference, but at first blush, the policy looks like a good one.
Seeking to stabilize the foundering housing market, President Obama is offering a plan to help as many as nine million families refinance their mortgages or avoid foreclosure, according to a summary released by the White House on Wednesday morning.
The plan, which is more ambitious than expected, would spend $75 billion to help keep as many as four million families in their homes, and would help as many as five million more refinance their mortgages to take advantage of lower interest rates. […]
The administration’s initiative, called the Homeowner Affordability and Stability Plan, is an effort to slow the rapid decline in the housing market. As the economy drops deeper into a recession, home values are falling faster and faster, and more Americans are losing their houses to foreclosures or distressed sales.
The plan would allow four million to five million homeowners refinance mortgages guaranteed by the government-controlled housing giants Freddie Mac and Fannie Mae. The administration said allowing people to refinance at lower mortgage rates would reduce monthly payments and save families thousands of dollars every year.
It also seeks to allow judges to modify mortgages in bankruptcy court for homeowners “who have run out of options” — a controversial provision opposed by lenders and many financial institutions.
The policy is aimed at offering lenders incentives into lowering rates, while making it easier for homeowners to lower their mortgages and monthly payments. (The White House published a helpful Q&A.) What’s more, by reducing foreclosures, administration officials believe the plan can stop the slide in home prices by up to $6,000.
Atrios summarized it this way: “Basically it tells Fannie and Freddie to refinance loans they have for certain borrowers at a lower rate, and uses various carrots to encourage other lenders to also do so.”
Tim Fernholz spoke to the Center for American Progress’ David Abromowitz, a housing policy expert, who also sounded encouraged by the outline of the policy: “The plan clearly places foreclosure prevention at the forefront of the overall economic recovery battle. Rather than hoping the modifications might occur as a benefit that would somehow flow from pumping more funds into banks, the plan plainly recognizes the basic facts: If over 10 million more families face the loss of their homes, then surrounding neighborhoods with 5 or 10 times that many families are all cutting back spending and shrinking the economy rapidly. What companies will be borrowing and expanding to sell more products if consumers are still scrimping, cutting costs and staying home? Contrast this plan with, for example, the recent conservative rhetoric during the stimulus debate acknowledging that foreclosures and vacant homes are the problem, but then proposing to reduce everyone’s’ mortgage rate to 4% regardless of whether they need it or not. This plan instead is targeted to where we most need to focus our efforts.”