by Mark Silva
President Barack Obama, announcing a $75-billion federal aid plan for millions of homeowners facing mortgage foreclosures, today will say the nation is facing "a crisis unlike any we've ever known.''
Appearing in Mesa, Arizona, to announce the Treasury Department's plans for some of the $700-billion in financial market bailout funds that Congress approved earlier this winter, plans to say: "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.
"It is a crisis that strikes at the heart of the middle class: the homes in which we invest our savings, build our lives, raise our families, and plant roots in our communities,'' the president plans to say.
Obama, citing conversations he has had with homeowners in crisis "along the rope lines'' of the campaign trail and his presidency, and in letters and emails that he has received, plans to say "their hardship and heartbreak are a reminder that while this crisis is vast, it begins just one house - and one family - at a time. ''
Nearly six million Americans are in foreclosure or at risk of foreclosure, the White House says, including about 150,000 in Arizona.
"The effects of this crisis have also reverberated across the financial markets,'' Obama plans to say, according to remarks released by the White House. "When the housing market collapsed, so did the availability of credit on which our economy depends. As that credit has dried up, it has been harder for families to find affordable loans to purchase a car or pay tuition and harder for businesses to secure the capital they need to expand and create jobs.
"In the end, all of us are paying a price for this home mortgage crisis,'' he will say. "And all of us will pay an even steeper price if we allow this crisis to deepen - a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit. ''
See the rest of the story below, and view an outline of the plan here:Homeowner Affordability and Stability Plan Fact Sheet.doc
The president's plan will provide for the refinancing of home loans for "millions of families in traditional mortgages who are underwater or close to it.''
It will modify loans for those "stuck'' in sub-prime mortgages that they can't afford because of soaring interest rates or "personal misfortune.'' And with federal subsidies, it will enable banks to lower interest rates for many.
The plan will assist seven to nine million families in restructuring or refinancing their mortgages to avert foreclosure, the White House says.
"It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell,'' Obama plans to say. "It will not help dishonest lenders who acted irresponsibility, distorting the facts and dismissing the fine print at the expense of buyers who didn't know better. And it will not reward folks who bought homes they knew from the beginning they would never be able to afford. In short, this plan will not save every home. ''
The plan will enable Fannie Mae and Freddie Mac, the institutions that guarantee home loans for millions, to refinance mortgages valued at more than 80 percent of the homes' values. The Treasury plans to provide up to $200 billion in capital to ensure that Fannie Mae and Freddie Mac can stabilize markets and hold loan rates down.
The Treasury will provide incentives for lenders to work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure. While these loans account for only 12 percent of all mortgages, the White House says, they account for roughly half of the nation's mortgage foreclosures.
And the plan sets guidelines for the mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution seeking financial aid from the government, and to modify home mortgages will have to do according to guidelines that will be put in place in two weeks.
"There will be a cost associated with this plan,'' Obama plans to say. "But by making these investments in foreclosure-prevention today, we will save ourselves the costs of foreclosure tomorrow... Given the magnitude of these costs, it is a price well worth paying...
"Our housing crisis was born of eroding home values, but also of the erosion of our common values.,' the president will say. " It was brought about by big banks that traded in risky mortgages in return for profits that were literally too good to be true; by lenders who knowingly took advantage of homebuyers, by homebuyers who knowingly borrowed too much from lenders; by speculators who gambled on rising prices and by leaders in our nation's capital who failed to act amidst a deepening crisis...
"It will not be easy,'' he will say. "But if we move forward with purpose and resolve - with a deepened appreciation for how fundamental the American Dream is and how fragile it can be when we fail in our collective responsibilities - then I am confident we will overcome this crisis and once again secure that dream for ourselves and for generations to come.''
Comments
What a great system !! The capitalists get to take their profits home and we, the workers, get to lose our home and bailout the very system, from which they stole their profits !! Socialize the capitalists' debt and and privatize their profits !! I want to be a capitalist when I grow up. I get to have a free ride, whenever we break the bank !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, America | February 18, 2009 11:27 AM
Uh Oh. I wonder how the markets will respond to this one.
Posted by: Adrian | February 18, 2009 11:33 AM
$75 billion to address the housing crisis is a joke. You have to multiply that number several times to come to the figure needed. Trillions of dollars worth of houses at risk of going under water and into default. That’s why the housing and mortgage crisis is still the root problem. Many more defaults can wreak havoc on the financial and securities markets. This is what banks are afraid of and why they are still tight fisted with money. If one believes the government should be spending money to fix the problem, this is where the government should have spent it. This is where the emphasis should have been before bailing out Wall Street or investing in a stimulus bill. It’s like Winston Churchill Said: “You can always count on Americans to do the right thing - after they've tried everything else.”
Posted by: John W. | February 18, 2009 11:56 AM
There are people ready to buy homes, just not banks ready to loan.
Tired of baling out those who can't get their act together.
No one starts owning a home in the greatest neighborhood.
You buy a home you can afford in an okay neighborhood.
Then you sell it and move on to the next neighborhood.
We all can't buy a home in Palm Beach! Be realistic people.
But we can bailout all those who jumped the fence to get to their neighborhood of dreams.
It doesn't work that way.
The "character" of the US is disintegrating.
Posted by: untrustworthy | February 18, 2009 12:57 PM
Love the comments.
They have lots of merit.
Posted by: Inky | February 18, 2009 1:36 PM
The markets have already responded, Adrian, prices for high-coupon mortgage-backed securities have immediately tumbled on Wall Street. The "toxic" securities just became a little more toxic.
Do the people who saved responsibly and got mortgages they could afford get a crack at 4.5%, fixed-rate, 30-year mortgages, too? Didn't think so.
Posted by: Jeff | February 18, 2009 1:50 PM
Are you responsible for your neighbor’s bad decisions?
http://pacificgatepost.blogspot.com/2009/02/obama-mitigating-mortgage-foreclosures.html
Obama and Congress appear to think so. Is there any common sense here?
Posted by: James Raider | February 18, 2009 2:40 PM
There are no banks ready to loan because there is a glut of houses in the market. Banks are not idiots.
People aren't either.
The only fools are those in congress that think they can decide, magically, what people want instead of us making that choice.
News to Obama & Neo-Republicans:
Communism failed.
I am a renter, why does the government choose to subsidize only homeowners?
They (Fed) gave infinite loans to banks (Freddie, Fannie). You saw the result.
Now they want to give infinite more, and think things will be better?
HAHAHA
Obama shows he doesn't get it:
"....It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell. It will not help dishonest lenders who acted irresponsibility, distorting the facts and dismissing the fine print....."
How about this will NOT BAILOUT for politicians who created this mess, by enabling subsidies to housing, cars, and other forms, which then distorted the real value of all those goods?
Go into a classroom full of kids; and leave candy on a table. Come back later to find the kids all sick, and the candy missing.
Who do you blame, the kids for eating the candy, or the person that left the candy there for the taking?
The Fed left candy for banks out there. They simply went with the sweet aroma of easy money and did what they did best.... eat .
Posted by: No more Obamas or McCains | February 18, 2009 2:55 PM
More micromanegement "control freak" policies and plans ... read a great article that I think clearly articulates how off target the idea of successful gov't (or any single entity for that matter) management of something as complex as our economy or even the housing market is...it is pretty much mathematically impossible.
http://townhall.com/columnists/WalterEWilliams/2009/02/18/economic_miracle?page=full&comments=true
==
Obama should leave the market alone-(housing, auto, banking ..etc) limit regulations to what makes sense, and make sure everyone in your admin is not using the system for politcal or monetary gain this should be the limit of gov't involvement...
Posted by: heartburn | February 18, 2009 3:05 PM
No doubt Obama's proposal is energetic and ambitious.
But anything implemented with the express purpose of reducing foreclosures and generally reversing the ongoing housing crisis faces questions of viability and, well, believability.
http://www.political-buzz.com/
Posted by: matt | February 18, 2009 3:55 PM
Poor Jeff; it's all about you.
I have a 4%, so what's wrong with you? btw if all your neighbors get foreclosed, your house won't be worth much.
Posted by: Flo | February 18, 2009 5:22 PM
What house? You don't know what my real estate portfolio looks like. You're assuming again, Flo, and you know what that makes u and even me.
People who bought too much house for the money they're making should be foreclosed on. Housing prices are just starting to get where they need to be. Trying to control the market and artificially inflate prices will have the opposite effect that this administration intends.
Posted by: Jeff | February 18, 2009 5:43 PM
This guy nailed it:
I am a renter, why does the government choose to subsidize only homeowners?
They (Fed) gave infinite loans to banks (Freddie, Fannie). You saw the result.
Now they want to give infinite more, and think things will be better?
HAHAHA
The banks won't loosen lending standards again no matter what Fannie and Freddie do. Every banking CEO in America is running scared of being labeled as the next Ken Lay because of Obama and his big mouth. They'd rather lose money than take any risks and be labeled a profiteer right now.
Posted by: Jeff | February 18, 2009 5:49 PM
Glad that Jeff and Obama agree:"And it will not reward folks who bought homes they knew from the beginning they would never be able to afford. In short, this plan will not save every home. ''
Posted by: mort | February 18, 2009 6:15 PM
Heartburn - great article.
.
Mortgage - do people actually still use those?
.
I would think that the additional $67/month would pull everyone straight out of foreclosure. What the Messiah's plan hasn't saved the world yet?
Posted by: Terry | February 18, 2009 7:49 PM
What does he mean, though, about not saving every home? If he means to give 4.5% rates over 30 years to people who agreed to 0% and other adjustable-rate mortgages than he will, indeed, be bailing out people who bought homes they knew (or should've known) they couldn't afford. It looks like he's reserving the "won't save every home" category for speculators only, and that's not going to fix the problem.
What banker in his right mind would agree to ANYTHING that has to go through Fannie and Freddie right now?
Posted by: Jeff | February 18, 2009 9:14 PM
Oh Jeffy, you say you have a portfolio? Is it a big one?? Show me, show me!
Posted by: Flo | February 18, 2009 10:07 PM
What a hilariously simple article. You are telling me that's what passes for serious analysis in the conservative press?
Nobody is talking about the feds running a supermarket.
However, I would like to know that the tuna doesn't have too much mercury in it, or that I am not paying too much for it due to restraint of trade or price fixing.
Posted by: C.Morris✈ | February 18, 2009 10:14 PM
Foreclosure is the major cause of our financial crisis. Government should really prioritize this issue.We should really keep ourselves updated.Thanks for sharing your thoughts.Good Day!
Posted by: foreclosure relief | February 18, 2009 10:49 PM
CM,
.
That is taking a complex issue and boiuling it down to a simple example. Next time we'll see if Dr. Williams can have a connect-the-dots picture so you can follow along.
Posted by: Terry | February 19, 2009 6:38 AM
What a hilariously simple article. You are telling me that's what passes for serious analysis in the conservative press?
Nobody is talking about the feds running a supermarket.
However, I would like to know that the tuna doesn't have too much mercury in it, or that I am not paying too much for it due to restraint of trade or price fixing.
Posted by: C.Morris✈ | February 18, 2009 10:14 PM
Thats all you got out of it?? IIf so, your completley missing the point- the author is exposing the folly of our congress people- even if they were exceptionally trained economists- trying to target stimulate an incredibly complex economy top down... things don't work this way ( at least well).
Posted by: heartburn | February 19, 2009 9:50 AM
Show me yours and I'll show you mine, Floie ;)
Posted by: Jeff | February 19, 2009 1:16 PM
Guess who's in foreclosure and will probably be first in line for Obama's foreclosure handouts? Hint: it rhymes with Rocktuplets Tom.
http://www.dailystab.com/octuplets-home-in-foreclosure/
Posted by: Jeff | February 19, 2009 1:20 PM