What's In This New Obama Foreclosure Plan?

With the economic stimulus (or “e-stim,” as we’ve been calling it) signed into law, President Obama turns his attention to the foreclosure crisis. At an event in Arizona today, he announced the following proposals to help homeowners.

Four to five million ineligible homeowners who borrowed from Fannie Mae and Freddie Mac will be able to refinance their mortgages at a lower rate.

Any institution that wants to receive any government assistance will have to abide by new guidelines (which will be announced in two weeks) that make it easier for homeowners to refinance their primary residences. Monthly payments will not exceed 31% of homeowner’s income.

President Obama expects his plan to cost $75 billion, but argues that this will eventually be offset by fewer foreclosures and defaults.

The Treasury and Fed will continue buying assets from Fannie Mae and Freddie Mac. Treasury is authorized to spend $200 billion in capital on these assets.

Awesome: bankruptcy judges will have the authority to modify the terms home loans so that homeowners can actually pay their mortgages.

$2 billion in grants to community groups who come up with innovative ways to solve the foreclosure crisis.

President Obama closes by chastising lenders and borrowers for irresponsibility. “They promised profits that were literally too good to be true,” and, “All of us have to learn to live within our means again,” which got huge applause.

(Photo: chchchacos)