WASHINGTON--President Barack Obama on Wednesday pressed lawmakers to back a $5 billion to $10 billion plan to help U.S. homeowners refinance, part of an election-year package that is unlikely to overcome Republican opposition in Congress.
Obama moved to counter Republican criticisms that the proposal would use
taxpayer money to bail out irresponsible borrowers by stressing that only
homeowners current on their payments could benefit. The president had sketched out the plan in his State of the Union address last week.
Nearly 11 million Americans are underwater on their mortgages, meaning they
owe more than their homes are worth. Millions more have lost their homes in
states that are up for grabs in November's presidential election.
The program would seek to move homeowners who have been locked out of
refinancing into government-backed loans. A senior administration official said it could reach 3.5 million Americans who are not in currently in
government-guaranteed loans. An additional 11 million homeowners whose loans are backed by Fannie Mae and Freddie Mac could also be eligible, the official said.
"The truth is, it will take more time than any of us would like for the
housing market to recover from this crisis," Obama said at a community center in Falls Church, Virginia. "But there are actions we can take, right now, to
provide some relief to folks who've been making their payments on time."
The White House is seeking to contrast Obama's stance with that of
Republican presidential front-runner Mitt Romney, who has said U.S. foreclosures should be allowed to run their course. The next contest in the state-by-state battle for the Republican presidential nomination is in Nevada, the state that has had the highest foreclosure rate in the nation in each of the last five years. Nevada is seen as a potential swing state in the presidential elections, as is Florida, which has also been hard-hit by foreclosures.
The Federal Housing Administration would run the program--another
sticking point for Republicans. The FHA has been hard hit by mortgage defaults, and Republican lawmakers have warned it could eventually need a taxpayer bailout.
Republicans have also rejected Obama's call to pay for the program with a
bank tax that Congress has turned down twice before. "Rather than increase the government's stranglehold on our nation's housing finance system, we need to dial it back," said Republican Representative Scott Garrett of New Jersey, who heads a House of Representatives subcommittee that oversees housing finance.
Obama's plan would allow borrowers to refinance even if they owe far more
than their homes are worth. Many homeowners have not been able take advantage of current record-low mortgage rates because the prices of their homes have fallen and lending standards have tightened.
The White House said the program could save borrowers an average of $3,000 a year. It would be open to homeowners who have been current on their payments for the last six months and who have not missed more than one payment in the prior six months.
The administration also said it would ask Congress to broaden the existing
Home Affordable Refinance Program, which seeks to help underwater borrowers with loans backed by Fannie Mae and Freddie Mac win new loan terms. It said the regulator that oversees Fannie Mae and Freddie Mac had not done enough to make the program accessible.
