Details Emerge on White House Housing Plan
NEW YORK (MainStreet) – President Obama's plan to allow struggling homeowners to get back on their feet is taking shape. Some key cornerstones of that plan would allow consumers with poor credit and big mortgage debts to refinance their homes.
The president got into some of the specifics of the plan in a speech yesterday in Falls Church, Va., during which he told the audience that the government “can’t wait” to address the housing crisis. He says the idea is to help homeowners and hold financial services companies accountable for how they treat mortgage holders.
“Already, we’ve set up a special task force, as I’ve asked my attorney general to investigate the kind of activity banks took when they packaged and sold risky mortgages,” President Obama said in his speech. “And that task force is ramping up its work as we speak. We’re going to keep at it and hold people who broke the law accountable and help restore confidence in the market. We’re going to speed assistance to homeowners. And we’re going to turn the page on an era of recklessness that hurt so many hardworking Americans.”
The White House also released a fact sheet with more details on the plan, which the White House calls a “blueprint for an America built to last.” It claims to use a “broad range of tools” to assist U.S. homeowners, and here are some key points:
The $3,000 Refinancing Provision
As long as homeowners are current on their mortgages, they qualify for a special government-backed mortgage refinancing plan that the White House says should help homeowners save, on average, $3,000 per year thanks to lower interest rates.
A Homeowner’s 'Bill of Rights'
The president’s plan guarantees a “single set of standards” to support U.S. homeowners, including access to a simple, streamlined mortgage disclosure form, full disclosure on mortgage fees and penalties, and built-in protection against unfair foreclosure practices.
Turning Foreclosures into Rentals
The plan seeks to stabilize neighborhood home values by turning foreclosed properties into rental units, with the government buying up the properties and then renting them out.
Increased Forbearance
The White House has asked banks to provide up to 12 extra months of home mortgage forbearance (basically “sidelining” mortgage payments) for unemployed homeowners, so they stand a better chance of keeping their homes.
Beef Up HAMP
The plan throws more financial resources into the federal government’s home modification program and foreclosure reduction program. It pretty much guarantees low-cost refinancing, even for homeowners with bad credit (a FICO core of 580 still gets a homeowner a refinancing deal). Homeowners with mortgages less than $729,750 qualify for the program.
The president says the plan is just the right antidote to help homeowners to get back on their feet. “[Our plan] will help millions of responsible homeowners who make their payments on time but find themselves trapped under falling values or wrapped in red tape," the president said.
But will banks and Congress go along? That’s the next step, and it’s unclear whether they will go along with the plan. Some are already saying that it’s time the government gets out of the way and lets the private sector fix the mortgage mess.
"Until the president gives up his crusade to increase the government's interference in the housing market, home foreclosures will continue to rise, our economy will continue to falter and every American's share of the national debt will continue to grow,” says Rep. Scott Garrett (R-N.J.), chairman of the House GSE and Capital Markets subcommittee.
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