On Feb. 18, President Barack Obama released the details of his administration’s housing strategy, the Homeowner Affordability and Stability Plan, estimated to assist between seven million and nine million families in avoiding home foreclosure. In doing so, the plan also will halt the sliding values of homes neighboring foreclosed properties, according to a speech prepared for the President’s announcement in Phoenix.
“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly by refinancing loans for millions of families in traditional mortgages who are underwater or close to it,” Obama said. He also pointed out that the plan will not provide assistance to speculators who drove property values up artificially, dishonest or irresponsible mortgage lenders, or homeowners who knowingly purchased homes they couldn’t afford.
The Homeowner Affordability and Stability Plan is based on four key elements:
1. Refinancing assistance for the four million to five million homeowners with Fannie Mae or Freddie Mac mortgages.
2. New lender incentives to encourage modification of at-risk subprime loans.
3. U.S. Treasury Department- and Federal Reserve-backed steps to stabilize mortgage rates, keeping them low and affordable for middle-class families.
4. Continued reforms to bankruptcy rules that will allow judges to modify mortgages on primary residences to prevent foreclosures.
“Taken together, the provisions of this plan will help us end this crisis and preserve for millions of families their stake in the American Dream,” Obama said.
At the same time, he continued, “we must acknowledge the limits of this plan. Our housing crisis was born of eroding home values, but also of the erosion of our common values … So solving this crisis will require more than resources. It will require all of us”—government, banks and lenders, and individuals—”to take responsibility.”
The White House has made available several documents to help Americans understand the elements of the plan and how they will work:
Q&A sheet For more on the Homeowner Affordability and Stability Plan, read the Washington Post‘s article or The Wall Street Journal‘s article. To hear what economists and analysts have to say about the plan, visit Reuters.com.
