MESA, Ariz. — Seeking to tackle “a crisis unlike any we’ve ever known,” President Barack Obama unveiled an ambitious $75 billion plan Wednesday to keep as many as 9 million Americans from losing their homes to foreclosure.
Announcing the plan in Arizona — a state especially hard hit by the housing crunch — Obama said that turning around the battered economy requires stemming the continuing tide of foreclosures.
“In the end, all of us are paying a price for this home mortgage crisis,” Obama said at a high school outside Phoenix. “And all of us will pay an even steeper price if we allow this crisis to deepen.”
But while talking in broad strokes about the importance of the issue to the economy as a whole, the president took care not to miss the pain that the housing problems are causing in individual families.
“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,” he said.
More expensive than expected, Obama’s plan aims to keep between 7 million and 9 million people from foreclosure. Of the nearly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody’s Economy.com.
Headlining Obama’s plan is a $75 billion Homeowner Stability Initiative, which would provide a set of incentives to mortgage lenders in an effort to convince them to help up to 4 million borrowers on the verge of foreclosure. The goal: cut monthly mortgage payments to sustainable levels, defined as no more than 31 percent of a homeowners income. Funding would come from the $700 billion financial industry bailout passed by Congress last fall.
Another key component would specifically help those said to be “under water” — with dwellings whose market value have sunk below the principal still owed on the mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 million to 5 million families do just that — if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac.
Housing Secretary Shaun Donovan stressed that homeowners don’t need to be delinquent in order to get help.
Asked why the cost had jumped to $75 billion from initial talk of a $50 billion effort, Treasury Secretary Timothy Geithner said, “We think that’s necessary to make a program like this work.”
And he said relief would be almost instantaneous, basically as soon as rules are published March 4.
Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said previous efforts had largely flopped. “We’ve not attacked the problem at the core,” she said. “We are woefully behind the curve.”
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