A Time for Change - Obama and the Housing Market
Tuesday, January 13, 2009SUZANNE PRATT: The president-elect's plans to stimulate the economy remained in the spotlight today. Barack Obama asked lawmakers not to block the release of the second half of the $700 billion Troubled Asset Relief Program or TARP. Even Federal Reserve Chairman Ben Bernanke weighed in, endorsing Obama's economic recovery plans. But he warned using those remaining TARP funds won't be enough to nurse the economy back to health. Both Obama and Bernanke agree the road to recovery begins with fixing the foreclosure crisis. In part one of our series, "A Time for Change: The Obama Agenda," Stephanie Dhue looks at the next administration's plans to repair the housing industry.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than a thousand homeowners entered the foreclosure process last week in Florida's Miami-Dade and Broward Counties. That has the phones at the non-profit neighborhood housing services of south Florida ringing off the hook with calls from struggling borrowers desperate to keep their homes. Arden Shank is the executive director. He says some government programs like Hope for Homeowners just don't work.
ARDEN SHANK, EXEC. DIR., NEIGHBORHOOD HOUSING OF SO. FLORIDA: There are stipulations and requirements put into it that slow the process down, that keep the money from being spent, that make it too complicated and finally then, don't really help the homeowner.
DHUE: Touted as a way to help 400,000 struggling borrowers, the Hope for Homeowners program has received fewer than 400 applications since it began in October. Lawmakers and the incoming Obama team are now retooling the program to make it more user-friendly.
REP. MEL WATT, (D) NORTH CAROLINA: We've got to try everything. I mean these are uncharted waters.
DHUE: Congressman Mel Watt is a member of the House Financial Services Committee. The North Carolina Democrat suggests troubled borrowers who aren't behind on their payments get help, although he admits that has drawbacks.
WATT: You run the risk of benefiting some people who may never default on their mortgage, but there's an advantage to doing that that goes beyond whether they're in default or not.
DHUE: The advantage he says, comes from stabilizing home prices and at the same time, boosting the broader economy.
WATT: Putting money in people's pockets has a stimulative effect and those people are likely to spend it and so in that way, the stimulus and the mortgage default issue are closely linked to each other.
DHUE: Lawmakers also want to use up to $100 billion from the TARP fund to create a program modeled on the FDIC's approach to foreclosures. FDIC Chair Sheila Bair designed the plan, which offers loan guarantees to lenders who streamline modifications. That involves lowering payments through a combination of cutting interest rates, extending the life of the loan or writing down the principle amount. Changes to the bankruptcy code so judges can modify loans are also under consideration. Shank supports that and another idea he calls rescue funds.
SHANK: For the family who may have been out of work for a brief period of time, is back to work, but they've got a couple of months where they are delinquent, we want a little bit of money to help them get caught up. It doesn't take billions to do that.
DHUE: Even with new leadership, the number of people falling behind on their mortgage payments is expected to increase due to rising unemployment and falling home prices. A successful foreclosure prevention plan would help stop the slide, if one could be put in place. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
