Aides to U.S. President Barack Obama have announced that his new plan to stem mortgage foreclosures will be unveiled Wednesday in Phoenix.
The Obama administration plan is expected to include $50 billion of funding for use in reducing mortgage payments for qualified homeowners, with the ultimate goal of lowering mortgage costs to 31 percent of borrowers’ incomes.
“We’re faced with an economic emergency here, and we’re going to have to move forward quickly on a number of things,” said senior Obama adviser David Axelrod Sunday on NBC’s Meet the Press. “We can’t drag our feet.”
“We obviously have a major problem problems with foreclosure, problems with people living on the edge and problems with home values around the country just plummeting,” Axelrod added. “We want to do something that will address all of those things.”
In order to lower mortgage payments, the Obama plan calls for requiring lenders to write down the home loan principal instead of reducing the interest rate. The hope is that a smaller balance will make payments more affordable, turn upside down mortgages right side up again and help people avoid foreclosure and short sales.
“We’re prepared to do what is necessary,” said Lawrence Summers, director of Obama’s National Economic Council, in a Bloomberg Television interview on Saturday. “Going directly at the problem means addressing affordability by addressing payments.”
Even as the White House prepares to release the details of its new mortgage plan, it has been cautioning Americans to be patient with the results of all government bailout and stimulus packages.
“It’s not going to be an overnight turnaround,” Axelrod said, speaking of the $787 billion stimulus bill passed last week in Congress.
White House press secretary Robert Gibbs concurred. “I think it’s safe to say that things have not yet bottomed out,” he told CNN’s State of the Union. “They are probably going to get worse before they improve.”