Obama to Detail Plan to Combat Foreclosures
Just because President Obama has now signed the gargantuan stimulus bill into law doesnâ€™t mean heâ€™s done addressing the economy. Up next: solving the housing crisis.
The ambitious plan [Obama] was announcing at a Phoenix high school Wednesday was expected to offer government cash to mortgage companies that reduce interest rates â€” and therefore monthly payments â€” for homeowners in danger of default, according to several people briefed on the plan. What remained unclear was how the government will decide who qualifies for relief.
One Democratic official familiar with the plan said it also would allow homeowners to refinance their mortgages if they owed more than their homes were valued. Still another section would give bankruptcy judges more authority to change mortgages. That last provision has been opposed by lenders, who said it would add risk and lead to higher interest rates.
This sounds like a classic carrot/stick arrangement. While details havenâ€™t been leaked, the plan would apparently reward lenders who choose to lower interest rates and punish those who donâ€™t by giving bankruptcy judges the authority to change rates as they see fit. Hopefully the President will give us more details today.
Considering the housing crisis is still unbalancing the economy, government action is arguably appropriate. Whatâ€™s frustrating is that TARP was sold as a solution to bad mortgages. Weâ€™ve spent hundreds of billions and put our future prosperity in jeopardy in the hope of improving our current economic situation. But weâ€™re just now taking serious steps to address the central problem of the recession. Obama canâ€™t be blamed for the actions of his predecessor, but I hope heâ€™s actually developed a serious and workable plan.
Weâ€™ll know more later today.