What impact will Obama’s new housing plan have?
Yesterday was a big day for homeowners facing foreclosure or for those struggling to refinance their mortgage loans because their homes have declined too much in value. Pres. Barack Obama unveiled his new housing rescue plan, and it is specifically aimed at helping homeowners avoid foreclosure and lower their monthly mortgage payments.
But before anyone gets too excited, it’s important to note that this plan won’t help every homeowner struggling to make housing payments. Instead, it would, according to information published in the New York Times, help as many as 9 million U.S. homeowners either refinance their onerous mortgage loans or keep them from losing their homes to foreclosure.
Of course, 9 million homeowners is a lot to help. But there are a lot of homeowners out there who will still be on their own, even after Obama’s housing rescue plan officially goes into effect.
The numbers regarding foreclosure are rather frightening. RealtyTrac, an online provider of real estate data, reported that foreclosure filings in the United States hit 2.3 million in 2008. That’s an increase of 81 percent from 2007, and the highest number of yearly foreclosure filings that the United States has ever seen.
Obama’s plan boasts three main components to help slow this trend. The first plank provides assistance to homeowners who have been making their loan payments on time but are also paying interest rates that are too high. These owners are currently unable to refinance because they do not have enough equity in their homes, or their residences are now, thanks to the slumping housing market, worth less than what they originally borrowed to pay for them.
The plan would also provide incentives to mortgage lenders to encourage them to alter the terms of the mortgage loans they made to homeowners who now risk losing their homes to foreclosure. The goal is to make these loans more affordable for homeowners who need just a bit of financial assistance to hold onto their homes.
In the third main portion of the plan, Obama would send $200 billion of new financial backing to both Fannie Mae and Freddie Mac, the two government-controlled mortgage-finance companies that play such a key role in the home-loan industry.
This measure, it is hoped, would guarantee that there is enough credit available in the country for people seeking mortgage loans.
This new housing plan is scheduled to go into effect on March 4. Unlike the $787 billion economic stimulus package that Obama signed earlier this week, the president can rely mostly on his executive powers to enact the housing rescue plan, the New York Times reported.
