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.
Arizona and Around the Nation: From Boom to Bust
Before the bottom fell out for Arizona's capital city, the area's population nearly doubled, filling municipal coffers for projects such as a light rail system.
The economy skyrocketed, based almost solely on the real estate market, which drew tourists, retirees and businesses seeking inexpensive spaces.
"Builders began to believe that they could build almost anything and there would be someone there to buy it," said Robert Mittelstaedt, dean of Arizona State University's business school. "I call it builders gone wild. So now we have 50,000 to 60,000 empty homes in the Phoenix metropolitan area."
Subdivisions built as the perfect family neighborhoods now have blocks of empty house and barren streets.
The tough market has made it difficult for homeowners like Leroy Ford to sell their homes. Ford, who recently lost his job, is trying to offload his four-bedroom home for $80,000.
"I would love to be bailed out," said Ford, who bought his home two years ago for $220,000.
And the 15,000 people who attended last week's job fair in Phoenix offered painful proof of the city's decreasing tax base, which has resulted in a $200 million deficit.
Experts predicted the city's housing recovery will take time, but it's a luxury Kinsale fears he doesn't have.
"If it ends up going down, down, down, my family could end up living on the street," he said.