Wednesday, February 18, 2009

Obama Foreclosure Speech a Winner

President Barack Obama's foreclosure speech is sure to instill confidence across America that he has his eye on the ball and is taking control of the housing situation. This single paragraph gives me great hope.
But I also want to be very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans. 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 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.

Read the full text of the Obama Foreclosure Speech

The Obama plan calls for:

* Helping borrowers who owe more than 80% of their home's value to refinance and reduce their monthly payments.

* Creating a $75 billion homeowner stability initiative to reduce monthly payments for at-risk borrowers by subsidizing interest rates. The goal would be to bring payments to no more than 31% of a borrower's income.

* Providing multiple incentives to servicers to modify loans and to proactively help at-risk borrowers while they are still current in their payments.

* Creating a $10 billion fund to protect investors and servicers against further home price declines.

* Requiring all financial institutions receiving government funds to participate in a standardized loan modification program, while seeking to have all federal agencies that own or guarantee loans also apply the guidelines.

* Allowing judges to modify mortgages during bankruptcy, a measure the financial industry has strongly opposed.

* Providing more Treasury Department backing of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and expanding the number of mortgages the agencies back.