U.S. President Barack Obama pledged $275 billion to a program that includes cutting mortgage payments for as many as 9 million struggling homeowners and expanding the role of Fannie Mae and Freddie Mac in curbing foreclosures, Bloomberg reported.
The plan includes $75 billion to reduce monthly payments for borrowers, helps homeowners with loans owned or backed by Fannie Mae and Freddie Mac to refinance at lower rates and promises incentives to industry. Obama will double to $200 billion funding available for Fannie and Freddie to buy loans.
"It will give millions of families resigned to financial ruin a chance to rebuild," Obama said today in Mesa, Arizona. "By bringing down the foreclosure rate, it will help to shore up housing prices for everyone."
The program signals the Obama administration, which will release more details in two weeks, plans a more active stance to halt foreclosures than the Bush administration, which backed voluntary industry efforts. Record foreclosures in the past year are swelling the glut of properties on the market, forcing down home values and undermining homebuilders' efforts to revive demand and lighten inventory by cutting prices.
"We tried voluntary, it didn't work," Federal Deposit Insurance Corp. Chairman Sheila Bair said today at a briefing in Mesa before Obama spoke. Bair has pressed the banking industry to accelerate loan modifications to keep people in their homes.
House Speaker Nancy Pelosi pledged to bolster Obama's efforts by pushing foreclosure-prevention legislation, including a bill to let bankruptcy judges lower mortgage payments. Senator Charles Schumer, a New York Democrat, said the proposal should succeed where other efforts have failed.
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