Issue of the week: Obama’s plan to stave off foreclosures
Barack Obama laid out an ambitious, $75 billion mortgage-relief package that allows homeowners struggling with high monthly payments to refinance into cheaper mortgages.
With housing prices still in free-fall and millions of borrowers at risk of losing their homes, Barack Obama this week laid out an ambitious, $75 billion mortgage-relief package, said Michael Fletcher and Renae Merle in The Washington Post. The president’s plan “will supplant a series of government foreclosure prevention efforts that have languished and failed to stop the historic slide in home prices and spike in foreclosure rates.” Larger than expected, the plan would allow homeowners struggling with high monthly payments to refinance into cheaper mortgages, even if their homes are worth less than their loan amounts. And it creates a system of rewards to lending institutions that modify loans to borrowers at imminent risk of foreclosure. Obama said the plan, which could keep up to 9 million borrowers in their homes, “will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans.”
The White House is offering mortgage lenders a combination of “carrots and sticks” to win their cooperation, said Edmund Andrews in The New York Times. The biggest carrot is a proposal to subsidize borrowers’ interest payments, with the government and lenders sharing the cost. The administration contends that subsidies would cost lenders far less than buying troubled loans outright. The biggest stick is pushing for legislation “that would give bankruptcy judges new power to restructure mortgages and reduce a borrower’s payments.” Bankers vehemently oppose giving judges the power to “cram down” loan modifications, “warning that investors will stop financing mortgages if they know that a judge can unilaterally change the terms.” If banks want to avoid a court-ordered cram-down, Federal Reserve Gov. Elizabeth Duke said this week, they should “consider options like allowing borrowers the chance to remain in their homes as renters rather than owners.” Otherwise, the government will have
to intervene.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
It’s a little late to ask banks to carry the ball, said Brian Grow in BusinessWeek. The Obama administration is intervening in the mortgage market because the banks have done nothing to hold back the “terrifying wave of home foreclosures.” In fact, “banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem.” Consider Hope for Homeowners, a voluntary refinancing program that banks said would save 400,000 homeowners from foreclosure. So far, it has “produced only 25 refinanced loans.” Rather than come up with a systematic solution to the mess, the banks apparently have decided to “pin their hopes on an unlikely housing rebound.”
Bankers aren’t the only ones who need to lower their expectations, said John Wasik in Bloomberg.com. For a decade, borrowers assumed that because housing prices were rising at a double-digit annual clip, they would do so in perpetuity. “Our post-bubble era demands a new lens through which to view homeownership.” Don’t assume that the value of your home will rise steadily. More likely, “it will barely track inflation.” In short, we need to stop thinking of our homes as “investments” and instead think of them as, well, our homes.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
7 cocktails for a comforting autumn
The Week Recommends Vodka, rum, brandy, mezcal: The gang's all here
By Scott Hocker, The Week US Published
-
Texas court allows execution in shaken baby syndrome case
Under the radar The state could be the first to carry out the death penalty for someone convicted due to the diagnosis, despite its controversial applicability
By Theara Coleman, The Week US Published
-
How do presidential elections affect the stock market?
The explainer If you are worried, take heart: Market changes in response to what is happening politically are likely to be short-term
By Becca Stanek, The Week US Published
-
How could J.D. Vance impact the special relationship?
Today's Big Question Trump's hawkish pick for VP said UK is the first 'truly Islamist country' with a nuclear weapon
By Harriet Marsden, The Week UK Published
-
Biden, Trump urge calm after assassination attempt
Speed Reads A 20-year-old gunman grazed Trump's ear and fatally shot a rally attendee on Saturday
By Peter Weber, The Week US Published
-
Supreme Court rejects challenge to CFPB
Speed Read The court rejected a conservative-backed challenge to the way the Consumer Financial Protection Bureau is funded
By Peter Weber, The Week US Published
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published