President Obama just completed a speech given in Mesa, AZ in which he highlighted the specifics of his plans for helping the U.S. housing markets recover.
He laid out a 5-point plan that included the following aspects:
- Help 4-5 million American homeowners who are upside down on their mortgage (their loan balance is higher than their market value of their home) refinance with Fannie Mae and Freddie Mac. Cost to taxpayers will be zero.
- Sub-prime lenders to modify terms of loans. Only 12% of mortgages are sub-prime loans, but over 50% of the foreclosures are from sub-prime products. The government is setting forth clear guidelines in which these modifications must be handled. The lenders must reduce the mortgage payments down to no more than 31% of the borrower's income. An estimated 3-4 million home owners may be affected.
- Ensure liquidity and take mortgage rates low my continuing to buy mortgage bonds secured by Fannie Mae and Freddie Mac. Also, help shore up the liquidity of state housing finance authorities.
- Help families avoid foreclosure by reducing balances to market values on primary residence homes.
- $2 billion in grants for local neighborhood efforts in fighting foreclosures.
I was impressed by the President's effort to clearly and specifically explain how he plans to tackle this huge problem. I also liked the fact that he ended by saying that lenders, bankers, and consumers must act more responsibly in the future in order for us to avoid encountering these types of problems again.
Now, what the President said sounds good and hopefully will be successful. The question remains, can they pull it off, execute the plan, while still ensuring our future and the future of following generations. Only time will tell.
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