Time for All of Us to Step Up
On Wednesday the President announced the Homeowner Affordability and Stability Plan -- we asked Housing and Urban Development Secretary Shaun Donovan to come and explain the plan
The President has talked about the solution to this economic crisis as a stool with several legs, and his commitment to a comprehensive approach was clear when he moved from the first leg, the American Recovery and Reinvestment Act, immediately into the second and third legs, the Financial Stability Plan and the Mortgage Affordability Plan. This started as a mortgage crisis, and then a credit crisis, but it’s become a job crisis, so we have to take it on all at once.
We estimate that the plan we’ve developed should help as many as nine million homeowners, and the effects could start kicking in heavily in March. But that also depends on homeowners knowing how to take advantage of the program – if you are struggling to keep up with your payments, or if you’re now "under water" and having trouble refinancing because you’ve seen your home value fall, take a look at the Q & A we put together on whether you qualify and how to get help.
Lots of people who played by the rules will be benefiting from this plan, in a couple different ways. Through refinancing and loan modifications with clear guidelines, along with new opportunities for people going through bankruptcy to get back on their feet, millions of people can get to a place where paying their mortgage every month is realistic again. A third part of the plan is $200 billion as a backstop to Freddie Mac and Fannie Mae, who issue more than 2/3 of the mortgages in this country, and those will go only go to people with good credit.
Now, as tragic as this has been, we believe that there are some who shouldn’t be helped in this plan. Some homeowners simply went well beyond their means, some bought additional property as a risky investment – these people will not be eligible for this plan.
Lenders have to have skin in the game here too. We worked hard to find the right balance between incentives for all parties – the government, lenders, and borrowers -- to take part, while ensuring that everybody also pulls their weight. We also required any lender engaged in the broader Financial Stability plan to take part. As the President was about to sign the American Recovery and Reinvestment Act, he said, "if we are willing to continue doing the critical work that must be done -- by each of us, by all of us -- then we will leave this struggling economy behind us, and come out on the other side, more prosperous as a people." That’s the principle we tried to build from in designing this plan.