Seeking to tackle “a crisis unlike any we’ve ever known,” President Barack Obama unveiled an ambitious $75 billion plan today 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 says that turning around the battered economy requires stemming the continuing tide of foreclosures. The housing crisis that began last year set many other factors in motion and helped lead to the current, widening recession.
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%, 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% of a homeowner’s income. Funding would come from the $700 billion financial industry bailout passed by Congress last fall.