TOPICS > Economy

Obama Unveils Plan to Curb Home Foreclosures

February 18, 2009 at 6:00 PM EDT
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President Barack Obama unveiled a $75 billion plan to ease the mortgage crisis that helped trigger the country's economic crisis. Kwame Holman reports on the president's announcement and other economic news of the day.
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JIM LEHRER: President Obama turned his attention to the nation’s severe housing crisis today. He laid out a plan designed to help millions of Americans fight foreclosures. Kwame Holman has our lead story report.

KWAME HOLMAN: The setting today — Mesa, Arizona — highlighted the problem. The state had nearly 120,000 foreclosures last year, third-highest in the country.

BARACK OBAMA, President of the United States: All of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to continue to deepen, a crisis which is unraveling homeownership, the middle class, and the American dream itself.

KWAME HOLMAN: To that end, Mr. Obama offered the Homeowner Stability Initiative. It would grant government incentives to lenders to cut monthly mortgage payments for as many as 4 million homeowners.

BARACK OBAMA: If lenders and homebuyers work together, and the lender agrees to offer rates that the borrower can afford, then we’ll make up part of the gap between what the old payments were and what the new payments will be. Under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower’s income.

Plan would help to refinance

KWAME HOLMAN: Another 4 million to 5 million mortgagees would get to refinance at lower rates if they owe more than their home is worth. But Mr. Obama warned there were some people who should not expect to benefit.

BARACK OBAMA: It will not help speculators who took risky bets on a rising market and bought homes not to live in, but to sell. It will not help dishonest lenders who acted irresponsibility, distorting the facts...distorting the facts and dismissing the fine print at the expense of buyers who didn't know better. And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.

KWAME HOLMAN: The plan would cost an estimated $75 billion, including funds from the TARP program, originally meant for banks. The president said it's a price well worth paying.

BARACK OBAMA: But by making these investments in foreclosure prevention today, we will save ourselves the costs of foreclosure tomorrow, costs that are borne not just by families with troubled loans, but by their neighbors and communities and by our economy as a whole.

GM asks for more funds

KWAME HOLMAN: On top of the billions for housing, the government soon may find itself doling out more money to domestic automakers. Late Tuesday, General Motors announced it could need $30 billion in federal loans, up from its original estimate of $18 billion.

G.M. also said it's cutting 47,000 jobs globally by year's end, nearly 20 percent of its work force, and it's closing five more U.S. factories, still to be named. CEO Rick Wagoner told reporters there's a great sense of urgency.

RICK WAGONER, CEO, General Motors: In the 11 weeks since our initial plan was filed with Congress, the condition of the U.S. and global economies, as well as the industries, auto industries, has significantly deteriorated.

Fed projects deeper job loss

KWAME HOLMAN: Chrysler, meanwhile, said it will cut 3,000 jobs and drop three vehicle models, the Dodge Aspen and Durango and Chrysler P.T. Cruiser. It's also seeking $5 billion in federal loans, on top of $4 billion it got last December.

A task force led by Treasury Secretary Timothy Geithner and Lawrence Summers, head of the National Economic Council, starts reviewing the carmakers' restructuring plans later this week.

Meanwhile, the United Auto Workers agreed to help G.M., Chrysler and Ford cut costs by limiting overtime and dropping cost-of-living raises. But the industry's distress continued to spread, as Goodyear announced it's dropping 5,000 workers because sales of tires have plunged.

The trend also showed up in a government report that overall industrial production fell nearly 2 percent in January. Even the Federal Reserve chairman, Ben Bernanke, said today the economic damage has hit close to home.

BEN BERNANKE, Federal Reserve Chairman: But in examples that resonate with me personally, the unemployment rate in the small town in South Carolina where I grew up has risen to 14 percent, and I learned the other day that what had once been my family home has been recently put through foreclosure.

KWAME HOLMAN: As Bernanke spoke, the Fed issued a bleak new forecast for the year. It projected unemployment could get near 9 percent and economic activity will contract at least 0.5 percent.