On Wednesday in Phoenix, Obama will announce a plan to stop home foreclosures.
Bloomberg: The White House is willing to spend more than the $50 billion already pledged to stem home foreclosures and intends to focus its efforts on reducing monthly mortgage payments, rather than principal, said Lawrence Summers, the president’s top economic adviser.
“We’re prepared to do what is necessary,” Summers said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” yesterday. “Going directly at the problem means addressing affordability by addressing payments.”
Mounting foreclosures have hammered an already weakened housing market, helping to drive the economy deeper into recession. Economists surveyed by Bloomberg News forecast that gross domestic product will contract 2 percent this year, its biggest decline since 1946.
President Barack Obama will outline his proposal to deal with the housing crisis next week. The announcement will come after lawmakers voted on Obama’s $787 billion fiscal stimulus that’s aimed at restarting growth and providing for 3.5 million jobs. Read the rest
Democrats are already working on legislation:
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said the administration's program would probably require changes to federal law. Some of those are already working their way through Congress. But Frank said he is looking to pull them together into a single housing package.
The legislation would include a provision changing the bankruptcy law to allow judges to modify the mortgages of distressed homeowners, including by reducing the principal of the loan to the property's current market value, he said. This proposal has already gained support from one House committee but drawn fierce objections from Republicans and the financial industry. Though Obama supports this provision, he declined to include it in the stimulus bill approved yesterday, fearing the bankruptcy measure would derail the overall legislation, Democratic congressional sources said.
Another provision, Frank said, would provide legal protection to lenders who reduce interest rates or otherwise modify the terms of troubled loans for homeowners. Some previous foreclosure prevention efforts have been hampered by the threat that investors who own securities backed by the mortgages would sue to block loan modifications, according to the financial services industry. WaPo
Meanwhile, banks have put a moratorium on foreclosures. How good of them.
As the administration moved closer to announcing its plan, J.P. Morgan Chase, Bank of America, Citigroup and several other lenders announced temporary moratoriums on foreclosures of owner-occupied properties. The moratorium, while temporary, gives the Obama administration some needed time, Frank said. "It takes a little of the heat off of Geithner," he said.
