Obama Outlines Mortgage Rescue Plan in Phoenix

By JONATHAN KARL

President Obama heads to Phoenix today to unveil part three of his economic recovery plan: dealing with the foreclosure crisis.

Let’s hope the markets like it better than parts one and two. Yesterday as the President signed the stimulus bill, the Dow sank 297 points, the second biggest drop of 2009. The only day worse this year was when Treasury Secretary Geithner unveiled his financial rescue plan and the Dow tanked more than 330 points.

The White House won’t make the same mistake twice. Unlike the Geithner announcement -- which was short on specifics and struck many in the financial world as half-baked -- this plan will be detailed. It will also be expensive with huge sums of money going both to banks and to individuals in mortgage trouble.

The initial price tag is already known: $50 billion from the TARP program. But I am told the overall cost could climb over $200 billion, and although the White House will not immediately seek more money from Congress, another request down the road is likely.

“At the heart of the plan is an effort to make loans more affordable by providing a government subsidy to help mortgage companies modify certain troubled loans,” writes Deborah Solomon in the Wall Street Journal. “Because any reduction in monthly payments will hurt the bank or investor who owns the loan, the government is expected to help defray the costs with a subsidy. That could take the form of a direct payment. The government could also match, point by point, any interest-rate reduction made by the servicer. The administration may provide between $800 to $1,000 per loan, according to a financial-services representative familiar with the plans.”

Per ABC News' Jake Tapper, the plan will include a program to allow homeowners to refinance their mortgages through Fannie Mae and Freddie Mac if they owe more than their homes are worth and “an effort to make loans more affordable through various means – extending loans, lowering interest rates, and other ways.”

The venue for the announcement is Dobson High School in Mesa, Ariz. The local paper of record describes just how badly the foreclosure crisis has hit Mesa and the rest of the Phoenix metro area.
“Home building has slowed to a crawl,” write Catherine Reagor and Dan Nowicki in the Arizona Republic. “More than half of metro Phoenix's home sales are foreclosure homes being resold for bargain prices. The median sales price of an existing home fell to $136,000 in January, down 49 percent from the peak in 2006.

“What many Valley residents want to hear from Obama today is how long it will take to get the new programs up and running, and which homeowners can expect to receive help. Homeowners and industry leaders will also be listening for what the government plans to do to make more lenders modify the loans of homeowners facing foreclosure.”