President Obama unveiled his $75 billion Help For Homeowner plan and he was stern about banks and lenders being held accountable for their actions.   Just as he demanded responsibility from all parties when announcing the American Recovery and Reinvestment Act of 2009 on February 17 2009, this new Homeowner plan requires help not just from the government and banks, but also borrowers.  The President explained that homeowners need to take responsibility for our own actions, live within their means and not assume that housing prices will go up 20, 30 and 40% every year.

According to the President, the plan will not rescue the irresponsible or scrupulous.  It will not help the speculators.  It will not help lenders that acted dishonestly by distorting the facts and dismissing the fine print and will not reward folks that knew they would never be able to afford the home or loan from the beginning.   Though we all want to be saved, President Obama said that this plan will not save everyone.

Schtuff the plan will do:

  1. Make it possible for 4-5m currently ineligible borrowers who have Freddi/Fannie backed loans to refinance at lower rates even if under water.  It will allow families locked in at a higher rates to refinance.  The cost to taxpayers is zero for this portion of the plan.  Though Freddi/Fannie will get less money from the readjusted mortgages, it will be balanced by fewer defaults and foreclosures.
  2. Create new incentives for lenders to rework/restructure sub-prime loans.  The plan will establishes clear guidelines that will encourage lenders to modify under the new guidelines.   Lenders will be required to take no more than 32% of borrowers income.   The cost today will be mitigated by saved costs of foreclosures tomorrow, but there is a cost to taxpayers for the portion of the plan.
  3. Keep rates low for middle-class families looking to secure rates by using the funds approved by congress in the American Recovery and Reinvestment Act.   The Treasury and Federal Reserve will purchase Freddie/Fannie securities to maintian stability.
  4. Create a wide range of reforms to help families stay in their home.  The administration will restructure bankruptcy rules so that borrowers pay the market rate of their debts as long as debts are payed by court order.

Obama Plans $75 Billion Outlay to Fight Foreclosures [NY Times]
Obama: Aid 9 million homeowners [CNN]

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