President Obama announced a sweeping plan to help stabilize housing prices

President Obama announced a sweeping plan to help stabilize housing prices and prevent further foreclosures, in Mesa, Ariz., on Wednesday.
The Homeowner Affordability Stability Plan includes several new initiatives designed to relieve struggling homeowners and stabilize housing prices nationwide.
The first component of the plan encourages refinancing by allowing four to five million “responsible” homeowners whose loans were owned or guaranteed by Fannie Mae (FNM: 0.5538, -0.0452, -7.55%) or Freddie Mac (FRE: 0.5605, -0.0295, -5%) to refinance their mortgages, reducing monthly payments.
President Obama addressed the need for broad refinancing efforts to prevent borrowers that are underwater in their loans from heading into foreclosure, stating, “…[W]e are not just helping homeowners at risk of falling over the edge, we are preventing their neighbors from being pulled over that edge too -- as defaults and foreclosures contribute to sinking home values, failing local businesses, and lost jobs.”
Another component involves the allocation of $75 billion to provide encouragement for homeowners on the verge of default to modify their loans. Lenders will be encouraged to lower interest rates for up to five years in an effort to bring down monthly payments; the Treasury Department will match the difference between the original rate and the adjusted interest rate. Lenders also have the option of reducing the principal balance on the mortgage loan, with Treasury sharing in the cost to the lender.
The Administration will also take steps to reform bankruptcy laws to support mortgage modifications.
“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value -- as long as borrowers pay their debts under a court-ordered plan,” the President said in his speech.
Treasury will give incentives of $1,000 to loan servicers for each mortgage eligible for modification and will pay up to $1,000 annually for each year the borrower stays current on the loan. Incentive payments of $1,500 would be paid to borrowers holding at-risk loans if they are able to restructure their loans prior to falling behind on loan payments and an additional $500 would be paid to servicers assisting those borrowers.
The Administration will also partner with the Federal Deposit Insurance Corp. to create an insurance fund of up to $10 billion to discourage lenders from foreclosing on mortgages that could have been modified. Mortgage holders could be paid an additional insurance payment for each modified loan they hold, if the home price index declines.
Finally, the plan will increase Treasury’s funding commitment to Fannie Mae and Freddie Mac and the Federal Reserve will continue to purchase long-term mortgage securities to maintain stability in the mortgage market.
This announcement comes on the heels of President Obama’s signing into law the largest federal stimulus plan in decades. The American Recovery and Reinvestment Act, the $787 billion stimulus bill, will use government funds to stimulate the economy and save jobs.



I think Obama has a good mindset on the plans for mortgages and to prevent future foreclosures. But giving money to the banks is just coming out of our pocket anyway so it doesn't matter what way you do it, the economy is in a reccession. If he sets cieling prices on mortgages and monthly payments its takes money away from the banks so they can't loan any out to future home buyers.