WSJ: White House Says Housing Plan Could Help Up To 9 Million People
18 Februar 2009 - 4:21PM
Dow Jones News
The Obama administration announced new plans Wednesday to make
it easier for up to 9 million people to rework or refinance their
mortgages, as the White House began an aggressive effort to
stabilize the housing market.
A central element of the plan would allow up to 5 million people
to refinance their mortgages into more affordable products through
Fannie Mae and Freddie Mac, according to a summary of the plan.
A total cost of the effort wasn't immediately clear, though it
could eclipse more than $200 billion because of new commitments to
the Fannie Mae and Freddie Mac.
(This story and related background material will be available on
The Wall Street Journal Web site, WSJ.com.)
The Obama administration's plan has three main elements: an
effort to help homeowners refinance; another effort to help
stabilize the housing market through a $75 billion initiative aimed
at reaching up to 4 million at-risk homeowners; and a third element
that aims to drive down mortgage rates.
Fannie Mae and Freddie Mac, which are privately held companies
under government control, figure prominently in the plan. The
government said it would increase its limits on the size of Fannie
Mae and Freddie Mac's portfolios to $900 billion each up from $850
billion. Treasury also said it would increase its funding
commitment to both companies "to ensure the strength and security
of the mortgage market and the help maintain mortgage
affordability."
Treasury also plans to increase its preferred stock purchase
agreements with the companies to $200 billion each from $100
billion each.
"The increased funding will provide forward-looking confidence
in the mortgage market and enable Fannie Mae and Freddie Mac to
carry out ambitious efforts to ensure mortgage affordability for
responsible homeowners," Treasury Secretary Timothy Geithner
said.
The previous level was set when the companies were taken over by
the Bush administration in September. Allowing the companies to buy
or guarantee riskier loans could give them a bigger role in
stabilizing the housing market but it could also expose them to
heavier losses in the coming months.
The White House summary says its plan wouldn't help speculators,
and instead would be aimed at keeping "hard pressed homeowners" in
their homes. They also said they are working on "clear and
consistent guidelines for loan modifications," which many have
argued are necessary to speed up the process of making loans more
affordable.
Fannie Mae and Freddie Mac will use the new guidelines for the
loans they own or guarantee.
All companies receiving government money "will be required to
implement loan modification plans consistent with Treasury
guidance," the summary said.
The plan includes multiple incentives to prod servicers to
modify loans. Servicers can receive an up-front payment of $1,000
for each eligible loan modification that meets certain
criteria.
For a loan to qualify for modifications, lenders would need to
bring the monthly mortgage payment down to 38% of a borrower's
monthly income. The government would match further reductions in
the interest rate down to 31% of a borrower's income.