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Obama plan seeks to save millions from foreclosure

(Agencies)
Updated: 2009-02-18 23:23

PHOENIX -- His massive stimulus plan now signed into law, President Barack Obama is turning to attack the home foreclosure crisis at the heart of the nation's deepening economic woes.

A foreclosure sign sits outside a home for sale in Phoenix, Tuesday, Feb. 17, 2009. With one of the highest foreclosure rates in the country, Arizona makes a fitting backdrop for President Barack Obama's new housing program, to be unveiled Wednesday. [Agencies]

His goal is to prevent millions of American families from losing their houses because they can't make mortgage payments.

"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," Obama said Tuesday as he signed his tax cut and spending package into law.

The ambitious plan he was announcing at a Phoenix high school Wednesday was expected to offer government cash to mortgage companies that reduce interest rates, and therefore monthly payments, for homeowners in danger of default, according to several people briefed on the plan. What remained unclear was how the government will decide who qualifies for relief.

One Democratic official familiar with the plan said it also would allow homeowners to refinance their mortgages if they owed more than their homes were valued. Still another section would give bankruptcy judges more authority to change mortgages. That last provision has been opposed by lenders, who said it would add risk and lead to higher interest rates.

The official, who spoke on the condition of anonymity to avoid pre-empting the president, said the Obama administration also would use Fannie Mae and Freddie Mac to help prevent borrowers from defaulting on their mortgages, and create national standards for loan modifications.

The biggest players in the mortgage industry already had halted foreclosures pending Obama's announcement.

Obama's announcement was coming a day after he signed into law a $787 billion economic stimulus plan he hopes will spark an economic turnaround and create or save 3.5 million jobs.

In a ceremony at the Denver Museum of Nature and Science, he hailed the plan's spending on green technology, education and health care, as well as badly needed repair of roads and bridges, and said those, plus middle-class tax cuts, represent the "essential work of keeping the American dream alive in our time."

Obama cautioned that the initiative isn't "the end of our economic troubles. Nor does it constitute all of what we are going to have to do to turn our economy around. But today does mark the beginning of the end."

Republicans dismissed the stimulus plan as hugely expensive and unlikely to succeed. To House Minority Leader John Boehner, R-Ohio, it was "a missed opportunity, one for which our children and grandchildren will pay a hefty price."

At the same time, the administration was grappling with the darkening prospects for the US auto industry.

Even as Detroit carmakers submitted restructuring plans to qualify for continued government loans, General Motors Corp. and Chrysler LLC asked for another $14 billion in bailout cash.

White House press secretary Robert Gibbs said the car companies' plans were being reviewed, but added, "It is clear that going forward, more will be required from everyone involved -- creditors, suppliers, dealers, labor and auto executives themselves -- to ensure the viability of these companies."