President Barack Obama has announced a new initiative to curb the high incidence of foreclosures that have plagued his administration from day one. Speaking at the James Lee Community Center in Falls Church, Virginia, on February 1, President Obama announced that his Executive Office is sending to Congress a new home mortgage refinancing plan that aims to help borrowers take advantage of record low rates, without bureaucratic constraints or exorbitant fees. The President also mentioned that under this new program homeowners would be able to save, on average, about $3,000 per year.
The initiative had come under fire from Republican Members of Congress even before its formal announcement. On the last State of the Union address, President Obama made mention to an outline to what he called “a blueprint for an economy that’s built to last.” Under the President’s proposal, some homeowners who have fallen behind on their mortgage payments would be eligible for refinancing at today’s ultra-low rates, something that does not sit well with Republicans. Former Massachusetts Governor Mitt Romney, the leading Republican candidate for the upcoming primary elections, has indicated his preference for letting foreclosures continue unabated. Republicans in Congress are likely to strongly oppose the President’s new plan.
Funding for the program is expected to be provided by taxes assessed against the nation’s major banks. The initiative could require between five to ten billion dollars. This isn’t the first time that the President asks Congress to levy taxes against the big banks that were bailed out by taxpayers in 2008 when they faced certain failure after the market for mortgage-backed securities collapsed. Those securities and other mechanisms that are thought to have precipitated the global financial crisis are now under scrutiny by a special task force convened by the President.
This is hardly the only initiative undertaken by the current administration to reduce the burden on American borrowers who were caught off-guard when the housing bubble burst during the George W. Bush administration, setting off an economic shockwave that lead to the Great Recession and the global financial crisis. The Home Affordable Modification Program (HAMP) has been the principal effort of the current administration in preventing foreclosures. When HAMP was announced in 2009, it was estimated that up to four million homeowners could be benefited by the program; however, statistics compiled by government agencies show that less than a million borrowers have been helped to date. Amid the remarks made by President Obama at the James Lee Community Center, he admitted that HAMP did not work as expected.