Obama's Housing Plan

Today in Mesa, Arizona, President Obama announced his $75 billion plan to help the housing market. He outlined the three-part plan that would help up to 9 million borrowers. Obama pointed out that his plan "will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans" and he urged Americans to “learn to live within our means again.”

Obama explained that the high foreclosure rates seen recently in many American towns does not only effect the homeowners losing their homes but also effects neighbors not facing foreclosure. Foreclosures lower the value of surrounding homes making the homes of homeowners current on their mortgages harder to sell, refinance or obtain home equity loans.

Homeowner Stability Initiative
The Homeowner Stability Initiative would help up to 4 million homeowners that are considered "at risk." The government would provide incentives to mortgage lenders if the lender worked with these borrowers to modify their current loan. The goal is to get the mortgage loan under 31% of the homeowners' income.

Upside Down Mortgages
Many Americans now see their home worth less in the current market than they currently owe of their mortgage. Part of Obama's plan is to help these homeowners refinance their mortgage. In the past, regulations would not allow homeowners to refinance if they owed more than 80% of the current market value of their home. The plan would removed the 80% loan-to-value guideline if the mortgage is owned or guaranteed by Fannie Mae or Freddie Mac. The homeowner must be current with their current mortgage and the new mortgage (including refinancing costs) cannot be higher than 105% of the current property value. The homeowner would need to refinance into a 15-year or 30-year fixed rate mortgage.

New Mortgages
The third prong of Obama's plan focuses on keeping interest rates low for new home buyers. Obama plans to add more money to Fannie Mae and Freddie Mac so the companies can continue to buy mortgages from other companies.