Obama To Unveil Mortgage Aid Plan Today

Washington, DC, Feb. 18, 2009--President Barack Obama today will present a $50 billion plan to slow a surge in home foreclosures that will subsidize cuts in mortgage payments for millions of struggling borrowers.

Obama wants to make loan modifications the centerpiece of his plan that also gives bankruptcy judges more power to help borrowers keep their homes, sources said.

“We must stem the spread of foreclosures and falling home values for all Americans and do everything we can to help responsible homeowners stay in their homes,” Obama said Tuesday in Denver.

Record foreclosures in the past year are increasing the inventory of properties on the U.S. market, forcing down home values and undermining homebuilders’ efforts to revive demand and lighten inventory by cutting prices.

The new housing program will set a common standard for mortgage modifications, and will operate along with programs started last year including Hope Now and Hope for Homeowners.

The government will subsidize interest-rate reductions by working with the companies that handle mortgages, known as servicers.

The plan will probably compensate servicers, or the investors holding the loans, if they reduce the payments to about 31 percent of the borrower’s pretax income.

The administration wants banks to offer loans with easier terms to borrowers in danger of defaulting on their mortgages.

Loan modifications will be combined with a push for more authority from Congress, including a proposal that would let bankruptcy court judges cut loan rate for borrowers.