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Obama Unveils Housing Plan to Help Up to Nine Million Homeowners

Posted on 18 Feb 2009

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President Barack Obama's plan to tackle the U.S. housing crisis is aiming to help up to nine million families. The plan will aim to provide refinancing to four to five million "responsible homeowners".

A $75 billion "homeowner stability initiative" will also aim to help reduce monthly payments for a further three to four million people.

Obama is due to reveal the plan in full when he gives a speech at a high school in Arizona later today. The $75 billion plan is more ambitious than expected. A summary was released by the Obama administration ahead of the speech.

Help for Homeowners

Falling house prices have been at the heart of the problems in the financial sector. More than one million people in the US have lost their homes in the housing crisis.

The plan is designed to assist homeowners who owe more on their mortgages than their homes are now worth, as well as those on the verge of foreclosure.

The summary said it could provide a buffer of up to $6,000 against declining values on the average home.

The plan also aims to increase confidence in mortgage giants Fannie Mae and Freddie Mac, which underwrite more than half of all U.S. mortgages, by providing a further $200 billion in Treasury funding.

Mixed Reception

"The plan is good, but it is unnecessarily complicated," said Michael Cheah from AIG SunAmerica Asset Management.

"I think it should come with side effects, like people trying to game the system. The Fed should just go ahead and expand the purchases of mortgage-backed securities."

However, others were more optimistic. Lawrence White, economics professor at New York University Stern Business School, said he thought that tackling the foreclosure problem was a good start.

"I think the combination of the stimulus package and the efforts at dealing with foreclosures will mean that maybe by the fall we see a bottoming out of housing prices," he said.