How Stimulus Package Would Help Homeowners
Goal of plan is to lower average homeowner's mortgage to 31 percent of income.
Feb. 16, 2009 — -- After signing the $787 billion economic stimulus bill in Denver, President Obama is scheduled to head to Phoenix Wednesday to unveil his housing plan.
The president is expected to propose anywhere from $50 billion to $100 billion to help stem the tide of home foreclosures.
One component of the plan would lower the average homeowner's mortgage payment, which can easily take up 38 percent of a family's income. The goal of the plan is to lower most homeowners' mortgages to 31 percent of their income.
A family with a household income of $50,000 will, on average, put $19,000 toward their mortgage. Under the president's plan they'd pay $15,500 toward their mortgage for a savings of $3,500.
Lenders would also be required to write down a mortgage principal rather than interest rates, with the goal of helping to reduce the chances of default.
The plan would also allow bankruptcy judges to modify mortgages, but only mortgages closed before the law is enacted are eligible.
Homeowners would also need to inform their lender or loan servicer in advance of their intention to file for bankruptcy protection.
Critics say the plan will push up interest rates on all future mortgages, even for people with excellent credit, and could create more losses for banks.
After years of benefiting from the housing market boom, Phoenix, one of the national capitals of urban sprawl, suddenly finds itself threatened by slow sales, bad mortgages and a rash of foreclosures.
After signing the economic stimulus bill in Denver early this week, President Barack Obama is scheduled to head to the Arizona metropolis Wednesday to try to make the case for the legislation to the American people.
The Sunbelt region has been one of the hardest-hit in the real estate bust. One in every 182 houses in Arizona received a foreclosure notice last month.
The president is expected to propose anywhere from $50-$100 billion to help stem the tide of foreclosures.
Obama is expected to ask banks and borrowers to absorb some of the losses.
Resident Julian Kinsale said his home's value has dropped more than 50 percent in just two years. Kinsale said it's critical that Obama take a long, hard look at the economic disaster sweeping his hometown.
"If there is a natural disaster the president goes. We are facing a ground zero, and I think it is a good thing for the president to come and see with his own two eyes and see what they are experiencing in Phoenix," he said.