White House fact sheet: Homeowner Affordability and Stability Plan

The White House released an executive summary of its Homeowner Affordability and Stability Plan on Wednesday. There's lots of detail in the document, but here are three major areas of focus. First:

Enabling Up to 4 Million to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80% of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have -- through no fault of their own -- seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama administration is announcing a new program that will help as many as 4 million to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

From the second area, Create a $75-Billion Homeowner Stability Initiative to Reach Up to 3 Million to 4 Million At-Risk Homeowners, here are the bullet points:

-- Helping Hard-Pressed Homeowners Stay in their Homes

-- No Aid for Speculators

-- Protecting Neighborhoods

-- Providing Support for Responsible Homeowners

-- Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels

The third, Supporting Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac, includes $200 billion in funding commitments.

How this plays out is not spelled out. If the earlier "Hope for Homeowners" plan, which only helped several hundred homeowners, was any indication, this could be very long process.

-- Lauren Beale

Thoughts? Comments?

Photo: President Barack Obama delivers remarks about the home mortgage crisis Wednesday at Dobson High School in Mesa, Ariz. Credit: Gerald Herbert / Associated Press

Comments

[Ace]

"Enabling Up to 4 Million to 5 Million Responsible Homeowners to Refinance"

If they are responsible homeowners, they should not NEED to refinance! They bought a house that they can afford. The current value of the house should not matter.

Doing a refi to save a point or so will only save most Americans a hundred or so bucks a month. It will not even begin to fix this problem.

"Helping Hard-Pressed Homeowners Stay in their Homes"

Hard-Pressed = subprime people who should have never bought a house. There is a 31 percent income cap to help these people. The banks are going to have to write down a whole lot of principal to make these numbers work.

[Cal]

The underwriting details haven't been released yet and with things like this the devil is ALWAYS in the details. March 4th we will know just how good or bad of a plan this is.

But reading through all the details I can get and reading between the lines. I don't think it is that bad of a plan. By capping refis on underwater homes to 105% of current market value they ensure that people in the danger zone get help but don't waste a lot of money on people impossibly underwater. The investors who own those impossibly underwater mortgages will have to share the pain through loan modification.

Because they are only worrying about first lien mortgages and (it sounds like) not looking at all the other debt I think the people expecting to be relieved of their massive debt burden will be very disapointed. Sure their payments will be cut, but they will be basically renting in their own home because the lenders won't generally cut principal.

[MyLessThanPrimeBeef]

Responsible homeowners?

What about members of ARSS - American responsible savers society?

Is he going to help them out by mandating min. 5% APY on their savings accounts?

[Ttown]

Here's an informative article from the Washington Post that outlines the Homeowner Affordability & Stability Plan:

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/18/AR2009021801159.html?sid=ST2009021801211

My husband and I purchased a foreclosure a 1/2 year ago in a great neighborhood (Playa del Rey) as first time buyers, so I am glad that we got in before the flood of legislation that will prevent foreclosures (i.e. the only hope of getting a reasonably priced house in LA right now!!).

[Tim K.]

From the scant details released, I don't think this is really going to do much to help underwater homeowners who overextended themselves.

For one, there is very minimal principle reduction. It's $1000 per year for 5 years. That's peanuts. Even if the lenders and government are able to reduce the payments to essentially 0% interest loans, the borrower is still stuck with a depreciating home and will simply go into foreclosure when it's time to sell. So all this does is delay the foreclosure, and I think most homeowners will realize that it's better to ditch the house than attempt to get strung along, even with government help.

Again, it looks fair and rosey on paper, but in reality, this is going to go nowhere. But it will make a good speech for Obama.

[Enlightenment]

Obama - Arrest everyone that lied on their home loan application!

[fezco]

What is the obsession with artificially keeping home prices up?

[Tim K.]

Also, an important point to remember, is this only helps people who WANT TO STAY in their homes.

This does nothing to help people who have lost their jobs and now need to relocate someplace to work, or need to split because of a divorce. This is a significant factor in natural home sales during normal markets, and those conditions are just as common now.

This also does not help people who are not residing in their homes (i.e. second homes). Notice just how many homes on the MLS have photographs of completely empty living and bedrooms with maybe token pieces of furniture present. Those homeowners are not helped either.

So for folks like Ttown - don't worry, more foreclosures are on the way. This is just a drop in the bucket. Have patience, and enjoy the price discounts yet to come!

[CompaJD]

"No Aid for Speculators "

Shouldn't the word "speculators" be replaced with "CALIFORNIANS"

[MyLessThanPrimeBeef]

Over 12 score years ago, this country was founded on peace and freedom. And over 7 score years earlier, we fought to end slavery.

Sadly, slavery still exists today in America...financial slavery. We need to emancipate our fellow countrymen who are slaves to debt.

This does not do it.

It's reactionary. Just more pandering to the irresponsible.

What sacrifice? What change? Are we just going to sacrifice the responsible to Mammon? Who should sacrifice? Who should be sacrificed?

[Angela Fuentes]

How can the word "affordability" be used in a bill that is dedicated to keeping home prices artificially high and therefore, unaffordable?

[RZ]

Does the bill do anything to help potential home buyers? If Obama really wants to help the economy, he should not try to keep home prices artificially high and give potential buyers a reason to buy now rather than in one year.

[Bubblewatcher]

Since this only applies to conforming loans -- aka those under $417K -- it doesn't actually apply to California, does it? The one guy I know who is desperately in trouble on his loan is actually underwater by about $300K, having paid close to $700K for his home about two years ago -- as is everyone else in his subdivision, which was built in 2005.

[Eric]

"-- No Aid for Speculators "

Is someone who bought a house for eight times their gross income using an option arm, hoping that appreciation will allow them to refi before the whole thing explodes not a speculator?

[Harry How]

Does anyone know of a site set up by the Obama administration for joe public to make comments on?

Everything said in this forum should be heard by his administration.

The responsible are on this forum and others like it cause we take interest in our own finances. The people that I know who are underwater on their mortgages spend little time on forums like this and very little time on their own financial security. The sad, pathetic and part that angers me most is that my tax dollar will go into subsidizing their ignorance and continue to keep prices artificially high.

Most of us on this forum knew that spending more than 30% of your income on a mortgage was just plain stupid. Any Google search on home buying has AFFORDABILITY as a main issue. Those who purchased a home without 20% down did so cause they were hoping to cash in on the craze. Affordability whether it's buying a car or going out to dinner is NOT rocket science. The percentage of people who were legitimately scammed by mortgage brokers or loan officers is a miniscule amount. You either thought that you could make money by buying a house or you thought you could lose money.

Not 1 cent should go to the banks or the borrowers. The banks should go bankrupt and the "homeowners" should rent as should have been doing all along.

This market is broken and confidence will not be restored until the true price of a home is set by the market not by government.

The US and it's citizens criticize China and other country's for it's government intervention on the market and on freedoms. We preach free markets freedom of choice until things go wrong then our government intervenes and jeopardizes the very principles we have been preaching to the rest of the world and has made the US a superpower it is. We have completely lost our way and all of us are going to suffer because of it.

[SW]

This will just keep the bubble inflated in CA. People still can't afford homes at the current prices. How is this going to help the people who are responsible and have money get into a home, but can't afford it at the current prices. Again we are paying for others mistakes. UGH.

[LA-Architect]

Actually, this bill will do little to prop up house prices in Los Angeles (or the greater California). To be eligible you can be no more than 5% underwater.

No help for the majority who bought overpriced assets and were more than happy for endless 20% annual appreciation. Sorry to not have more compassion, however I still remember the endless and inane discussion on why Los Angeles was "special" and house prices would never, ever come down!!! I'm still waiting for the Westside home prices to come down from there still ridiculous prices.

[Jeff Schepis]

Obama is trying to muscle the mortgage companies to reduce principle, or he’s going to give bankruptcy judges the power to do so. This is discrimination to responsible homeowners.

If anyone in given forbearance of there principle amount, all responsible homeowners should be given a check for the amount their homes have depreciated because of the irresponsible people.

That’s only fair and it can not go any other way, Otherwise we are teaching and telling people be irresponsible with money and to stay irresponsible because they will always be bailed out , and the responsible people are only given a bill for doing the right thing.