President Barack Obama’s plan to tackle the foreclosure crisis includes spending $75 billion in an effort to prevent up to 9 million Americans from losing their homes. The plan, which is more ambitious than expected, aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure. The initiative, which Obama will unveil during an afternoon speech at a Phoenix high school, is designed to help up to 5 million borrowers refinance, and provides incentive payments to mortgage lenders in an effort to help up to 4 million borrowers on the verge of foreclosure.
One Democratic official familiar with the plan says it also would allow homeowners to refinance their mortgages if they owed more than their homes were valued. Still another section would give bankruptcy judges more authority to change mortgages. That last provision has been opposed by lenders, who said it would add risk and lead to higher interest rates. The official, who spoke on the condition of anonymity to avoid pre-empting the president, says the Obama administration also would use Fannie Mae and Freddie Mac to help prevent borrowers from defaulting on their mortgages, and create national standards for loan modifications.
The biggest players in the mortgage industry already had halted foreclosures pending Obama’s announcement.