Will Obama’s Housing Proposal Work?

CENTRAL OHIO—At the heart of the financial crisis is the foreclosure and mortgage meltdown.

President Obama introduced a multi-billion-dollar plan to get America’s housing market back on track. Will it work, though?

PROPOSAL FAST FACTS
- The $275 billion plan would subsidize cheaper mortgages and allow more refinancing.
- The plan would pay lenders $75 billion in subsidies to reduce mortgage rates for homeowners facing foreclosure.
- Obama’s plan also would change the rules to allow Fannie Mae & Freddie Mac to refinance “upside down” homes.
- The plan would pump up to $200 billion into the system to make more mortgages available.

Are mortgage lenders on board with this proposal?

And how do families in the middle feel about it?

NBC 4’s Mikaela Hunt reported on WHERE THE ISSUE STANDS.

Julie is a Lewis Center wife and mother. She was living the American dream—until her husband’s business folded.

“We put 110 percent into it. We kept it going probably longer than we should have,“ Julie said.

During the good times, the family paid tens of thousands of dollars extra on their home-loan principal.

When they couldn’t pay their mortgage and went into the foreclosure process, they couldn’t use that money.

“Our lender is telling us, ‘No, this is not what we’re doing. These are the programs available.‘ And they dismiss it. You paid $60,000 when you didn’t have to, and they will not take it? They’ll take it. They just won’t apply it to what we owe,“ Julie said.

Julie and her family had little hope when she looked at Obama’s housing plan online.

Ohio experts Hunt talked with said things will change.

“Right now, what you have is loan servicers—people who collect the mortgage payments. They have not been able to modify loans because of contracts with investors,“ Bill Cosgrove said.

The Ohio Mortgage Bankers Association’s (OMBA) immediate past president, Bill Cosgrove, told another station in a Wednesday interview OMBA is “excited for the plan” and believed there are a number of solutions in it for homeowners. 

Cosgrove said he believes this will be a “powerful loan modification” program that will make loan servicers modify loans despite their contracts with investors. 

That’s been the problem until now, Cosgrove said. Loan servicers have had to answer to investors. 

In the past, the servicers could have been sued by investors if they violated that contract by changing loan terms, according to Cosgrove.

OMBA was concern that not enough homeowners will be helped. 

Those who are underwater right now—those who owe more than what their home is worth—will not necessarily be helped because the plan only goes to 100 percent of the home’s value. 

It does not cover those who owe more than their home is worth, according to Cosgrove.

The sheriff and appraisers showed up at Julie’s door the other day to prepare for foreclosure, but she said her lender continues to tell her not to worry.
 
“It’s incredibly hard, incredibly hard … The toll that this has taken on our family when all we’ve done is ask to make payments,“ Julie said.

MORTGAGE MODIFICATION
In general, you may qualify for a mortgage modification if:
- You occupy your house as your primary residence
- Your monthly mortgage payment is greater than 31 percent of your monthly gross income
- Your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.
- Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

MSNBC’s Consumer Guide To Obama’s Housing Plan
Click here to look at FAQs and other valuable information

The guide breaks down eligibility whether you’re current on your mortgage or are at risk of foreclosure.

For additional information on this developing story, stay with NBC 4 and refresh nbc4i.com—Where Accuracy Matters.
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