From NBC's Athena Jones
MESA, Ariz. -- Calling the steep rise in home foreclosures a "crisis unlike any we've ever known" that threatened to unravel the American Dream, President Obama today rolled out a multi-pronged plan to help millions of people who are struggling to pay their mortgages.
In a roughly 20-minute speech, Obama laid out the key elements of his $75 billion Homeowner Affordability and Stability plan he said was necessary to help the economy. The collapse of the housing market, the president argued, has been a root cause of the credit crunch that has made it hard for families to get loans and for businesses to operate, expand, and create jobs.
"In the end, all of us are paying a price for this home mortgage crisis," he told the crowd gathered at a high school here. "And all of us will pay an even steeper price if we allow this crisis to continue to deepen -- a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit."
The plan also uses up to $200 billion in capital -- funds that have been approved by Congress -- to help ensure that government-sponsored mortgage lenders Fannie Mae and Freddie Mac can continue to stabilize markets and hold mortgage rates down.
And in a return to the theme of responsibility that he has touched on repeatedly in recent weeks and months, Obama said solving the current crisis would require more than just resources.
"Government has to take responsibility for setting rules of the road that are fair and fairly enforced. Banks and lenders must be held accountable for ending the practices that got us into this crisis in the first place," he said. "Each of us as individuals have to take responsibility for their own actions. That means all of us have to learn to live within our means again and not assume that housing prices are gonna go up 20, 30, 40 percent every year."
The administration will release guidelines on how this program will be implemented on March 4, including what HUD Secretary Shaun Donovan called a "standardized net present value test" that will help determine mortgage values.
Following are the main points of the plan as outlined by the president and other administration officials:
-- The $75 billion plan will help 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure.
-- Donovan said close to 10% of all American families today are either in foreclosure or behind on their mortgages, and that the administration predicted roughly 6 million foreclosures over the next three years without this plan.
-- Some 4 to 5 million eligible homeowners who have loans held or insured by Fannie Mae or Freddie Mac will be offered new lower interest rates.
-- Some 3 to 4 million struggling homeowners with subprime and other loans with exploding terms and hidden fees will receive help. Lenders who participate will be required to reduce monthly mortgage payments to no more than 38% of a borrower's income. The government initiative would then help match further reduction in interest payments with the lender to bring that ratio down to 31% of the borrower's income.
-- The program is voluntary, but any bank that receives bailout money would be required to participate.