Obama goes to Congress with housing plan that would help more borrowers refinance their loans

By Associated Press, Updated: Wednesday, February 1, 6:13 PM

FALLS CHURCH, Va. — Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages.

The president’s proposal is laden with election-year politics and faces a difficult path in Congress. Obama wants to pay for the estimated $5 billion to $10 billion cost with a fee on the nation’s largest banks, a proposal that has failed to win support even when Democrats controlled both the House and Senate.

In addition, its potential impact could be limited by the fact that it would not apply to borrowers who are behind on their home loan payments, those most threatened by foreclosure.

The housing issue, while national in scope, particularly resonates in election battlegrounds such as Nevada and Florida that have faced record foreclosures. Obama himself drew attention to the politics surrounding the issue with a jab at former Massachusetts Gov. Mitt Romney, now the front-runner in the Republican presidential contest. Romney in October suggested the foreclosure process should be allowed to “run its course and hit the bottom.”

Without naming Romney, Obama said: “It is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom. I refuse to accept that, and so do the American people.”

Obama is asking Congress to pass legislation that would make it easier for more borrowers to refinance their loans, creating a new program through the Federal Housing Administration that would have the government assume the risk for the new mortgages.

Obama cast the effort as not only a needed step to spur the economy but as a necessary boost to America’s sense of identity.

“This housing crisis struck right at the heart of what it means to be middle class in America: our homes, the place where we invest our nest egg, place where we raise our family, the place where we plant roots in a community, the place where we build memories,” Obama said. He spoke at a community center in northern Virginia, outside Washington.

Obama’s proposal is the latest administration effort to help homeowners in the face of a massive number of foreclosures and plunging house values that have left millions owing more than their homes are worth. About 11 million Americans — roughly 1 in 4 with mortgages — are underwater, according to CoreLogic, a real estate data firm. Half of all U.S. mortgages — about 30 million home loans — are owned by nongovernment lenders.

Despite historic low interest rates, however, banks have been reluctant to refinance loans of such “underwater” homeowners. Under Obama’s plan, an eligible homeowner would be able to refinance a loan through the FHA, which would guarantee the new loan, assuming the risk if the borrower should default. The fee on large banks that Obama is proposing would finance the FHA’s insurance fund.

Obama goes to Congress with housing plan that would help more borrowers refinance their loans - The Washington Post