Obama unveils new actions to help "underwater" homeowners
President Obama on Monday unveiled measures aimed at stabilizing home prices in America and lightening the burden on families struggling to meet their mortgage payments, emphasizing in remarks in Nevada that he was no longer content to "wait for an increasingly dysfunctional Congress to do its job" before taking action.
Mr. Obama, after participating in a "kitchen table discussion" with Nevada homeowners Jose and Lissette Bonilla, outlined a set of measures that he says will help "help responsible homeowners refinance and take advantage of low mortgage rates."
The president's three-step plan would lift barriers prohibiting responsible homeowners from refinancing if "their home values have fallen so low that what they owe on their mortgage is 25 percent higher than the current value of their home"; it would eliminate some refinancing fees and lower closing costs; and it would seek to increase competition so that consumers can "shop around for the best rates" when refinancing.
"Right now, some underwater homeowners have no choice but to refinance with their original lender - and some lenders, frankly just refuse to refinance," he said. "These changes will encourage other lenders to compete for their business by offering better terms and rates, and eligible homeowners are going to be able to shop around for the best rates and the best terms."
He also outlined a plan called Project Rebuild, which would "put construction workers to work rehabilitating vacant or abandoned homes and businesses all across the country," according to the president, thereby simultaneously creating jobs and rebuilding houses.
"That will help stabilize home prices in communities like this one," said Mr. Obama, speaking to a crowd outside the Bonillas' home. "And it will help families like the Bonillas to buy a new home and build a nest egg."
"We will put construction workers back to work and we will rebuild homes," he added.
The Bonillas' home was refurbished through the Neighborhood Stabilization Program (NSP), a Recovery Act program that was established to help stabilize communities who suffered from foreclosures and abandonment - and the model that inspired Project Rebuild. As a result of the rehabilitation, which was valued at $50,000, the family was able to get new flooring, appliances and insulation for their home, among other improvements.
Mr. Obama emphasized his commitment to providing aid for communities like Las Vegas that had been particularly hard-hit by the burst of the housing bubble.
"Probably the single greatest cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago," Mr. Obama said. "Since then, average home prices have fallen by nearly 17 percent. Nationwide, more than 10 million homeowners are underwater... Here in Las Vegas, the city that's been hit hardest of all, almost the entire housing market is under severe stress."
"This is a painful burden for middle-class families," he added. "And it's also a drag on our economy. When a home loses its value, a family loses a big chunk of their wealth. Paying off mortgage debt means that consumers are spending less, businesses are making less, and jobs are harder to come by. And as long as this goes on, our recovery can't take off as quickly as it would after a normal recession."
Mr. Obama continued to hammer Congress for rejecting his jobs bill and, as he put it on Monday, failing to "do its job." He reiterated his pledge to "do everything in my power to act on behalf of the American people - with or without Congress."
"Where they won't act, I will," he said. "I'll keep doing everything in my power to help grow the economy, accelerate job growth, and restore some of the security middle class families have felt slipping away for more than a decade."
According to Dean Baker, the Co-Director of the Center for Economic and Policy Research in Washington, D.C., the effects of the measures Mr. Obama announced will likely be modest. In an interview with CBSNews.com, Baker said that if 800,000 borrowers are able to refinance, that would be "very good."
Housing analyst Edward Pinto told CBSNews.com' Corbett B. Daly that the plan would mostly help borrowers who owe less than their mortgage, despite the repeated talk from White House officials that it is aimed at so-called "underwater" borrowers.
