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Speaking in Mesa, Arizona the president said he will lift restrictions on refinancing loans with Fannie Mae and Freddie Mac so that millions of homeowners who owe slightly more than their house is worth will be able to refinance their loans at lower rates.
"While Fanny and Freddy will receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures," Obama said.
The second provision of the plan will set new guidelines for renegotiating subprime loans, with payments no more than 31 percent of the homeowner's income.
"Any institution that wishes to receive financial assistance from the government, from taxpayers, will have to abide by these guidelines," Obama said.
The president also wants to give bankruptcy judges the power to rework mortgage agreements, so called 'cramdowns' that business interests and banks have opposed.
Click here for additional details on Obama's foreclosure plan.
"Well it's going to make the lending guidelines a lot more strict," Realtor Robert Hernandez said. Hernandez is president of the Hispanic Chamber of Commerce in Alameda County. "It's going to tighten credit a lot."
Then there is the problem of high housing prices in the Bay Area. Home mortgages are frequently above the limits set for so called 'conforming loans.' The limit in California was raised to $625,000, but at the conservative free market think tank, the Pacific Research Institute, the director of research says it is not enough.
"Even with that higher value you're still going to have a material amount of citizens in the bay area who simply don't qualify for the packages announced this morning," Jason Clemens said.
In Oakland, Congresswoman Barbara Lee called the president's plan creative and bold; but she says the loan limits are a problem.
"I believe the conforming loan limit, you know it expired, it needs to be raised again; that's something we have to work on separately from this," Lee said.
Mortgages above the Fannie and Freddie conforming limits will not be eligible, but Obama will put $200 billion into the nation's two big mortgage lenders to keep rates low.
"Given the magnitude of these crises, it is a price well worth paying," Obama said.
The $200 billion is coming out of money already authorized by the /*Troubled Asset Relief Program*/ (/*TARP*/).
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