On the heels of criticism that the stimulus package doesn't do enough to address the housing crisis comes a proposal aimed at keeping people from getting tossed from their homes. Via the New York Times, more about the $75 billion "Homeowner Affordability and Stability Plan," set to be unveiled today by President Obama in Phoenix:
"The plan would seek to entice lenders into lowering rates, and would offer homeowners a chance to shave thousands of dollars off their mortgages. The government would offer homeowners principal reductions of $1,000 a year for five years if they stayed current on their payments, and would give $500 to loan servicers if they modified loans before borrowers fell behind in their payments. Or, if a lender lowered interest rates so that buyers were spending 38 percent of their monthly income on mortgage payments, the government would provide matching funds to lower that payment to 31 percent of income. The White House said such a reduction could equal $400 in monthly savings on a $220,000 mortgage." The press release about the plan is on the White House's web site, and there's also a PDF (download it here) that basically lays on different scenarios and looks at possible solutions provided under the new program.
On example laid out in the plan: "A family took a 30-year fixed rate mortgage of $207,000 on a house worth $260,000 at the time. (The family put just over 20% down.) They received a Fannie Mae conforming loan with an interest rate of 6.50%. Today: Family A has about $200,000 remaining on their mortgage but their home value has fallen 15 percent to $221,000. Under the Homeowner Stability Initiative: Family C can get a government sponsored modification that – for five years – will reduce their mortgage payment by $406 a month. After those five years, Family C’s mortgage payment will adjust upward at a moderate, phased-in level."
We'll post more reaction to the plan later today. One thing is for sure: Whoever is printing all this money has job stability.
· Obama Plans $75 Billion Outlay to Fight Foreclosures [NY Times]
· Help for homeowners [White House]