Obama Goes ‘ALL IN’ On Mortgage Plan
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Obama Goes 'ALL IN' On Mortgage Plan
President Barack Obama’s $275 billion mortgage plan removes any lingering doubt about his bold, “all in” strategy to rescue the U.S. economy.
The plan may not do much for Silicon Valley borrowers: More than 60 percent of the home loans in California in recent years won’t qualify for help because they aren’t held by Fannie Mae or Freddie Mac, the government-sponsored mortgage giants. But stemming the tide of foreclosures across the country is essential to stop the free fall of the national economy. What’s good for the nation eventually will be good for the valley.
Combined with the bank bailout and the economic stimulus package, the home mortgage plan means Obama is betting in the neighborhood of $2 trillion that the federal government can stabilize the housing sector and prevent a severe recession. The success of his presidency rides on winning a substantial return on this investment.
His challenge now is to convince the nation that his programs are working. No reasonable American expects a swift turnaround, but trust in the strategies can itself be a factor in revival. Even people with secure jobs have stopped spending money this winter because they’re scared of what could happen next.
Part of the challenge is the difficulty of gauging success. What are reasonable expectations over the coming year? Obama should set out some general criteria so that he can mark every step forward. Even slow progress will boost Americans’ confidence and its traditional byproduct, consumer spending.
Curbing foreclosures is the essential step. This crisis was the catalyst for most of what has gone wrong with the economy, through its ripple effect through communities and the weaknesses it exposed throughout our financial systems.
Many responsible Americans find it galling that, under the president’s plan, their tax dollars will be used to help homebuyers who got in over their heads, some of them by taking irrational risks. There’s no getting around it. It’s galling.
But continuing foreclosures, now moving well beyond subprime borrowers, are torpedoing down the value of all homes. They’re also undercutting public services, such as police and fire protection, in communities across the country where property tax is the main source of revenue. The crisis now affects every sector of the economy, and everyone has an interest in stemming it.
President George W. Bush’s initial plan to help more than 200,000 homeowners did little because it was offered only to delinquent borrowers, too late to prevent disaster, and lenders didn’t want to write down the principals on loans that far exceeded the value of the property. Unless that happens, families will continue to walk away from homes, leaving them derelict. Obama’s plan is aimed at prevention, offering help before borrowers are dangling off the cliff. As a bonus, the lower loan payments will leave more disposal income to help prime the economic pump.
If the plan works, stabilizing housing markets will be worth the anticipated cost.
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Tags: bank bailout, barack obama, byproduct, consumer spending, economic stimulus package, fannie mae, freddie mac, home loans, home mortgage plan, homebuyers, lingering doubt, national economy, ripple effect, silicon valley, slow progress, spending money, stemming the tide, substantial return, swift turnaround, trillion
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