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March 4th, 2009
04:54 PM ET

Financial Dispatch: Obama’s foreclosure fix

Andrew Torgan
CNN Financial News Producer

Mortgage modifications often get bad rap, yet President Obama is depending on them to stop the foreclosure crisis - giving them a central role in his $75 billion foreclosure prevention program.

The multi-pronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so monthly payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

To participate in the loan-modification plan, borrowers must:

-have obtained their mortgage before Jan. 1, 2009

-have a primary mortgage of less than $729,500

-live in the property

-fully document their income by providing tax returns and pay stubs

-sign a statement of financial hardship

-go for counseling if their total household debt (including auto loans, credit cards and alimony) totals more than 55% of their income.

President Obama also this morning announced a crackdown on waste and cost overruns in government procurement procedures that he estimates will save the American people up to $40 billion a year.

One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work. The president said that, "even if these were the best of times, budget reform would be overdue in Washington."

The private sector lost nearly 700,000 jobs in February, according to a report out this morning from payroll processor ADP, but another report showed that employers announced fewer job cuts last month.

The ADP report, which is calculated on payroll data, said the private sector eliminated 697,000 jobs on a seasonally adjusted basis in February. That's an increase of 175,000 job cuts, or 25%, from the 522,000 job cuts reported in January.

Separately, the number of planned job cuts announced in the month fell for the first time since December, according to outplacement firm Challenger, Gray & Christmas. Job cut announcements by U.S. employers totaled 186,350 in February, down 23% from January's 241,749 cuts, which was a seven-year high.

Wall Street is making another run today at halting the market slide that has left the Dow and S&P 500 at their lowest levels in about 12 years. Stocks did open higher amid signs of improvement for China's economy and as the administration unveiled the details of the foreclosure prevention plan.

Gas prices held steady overnight at $1.933 a gallon ($1.93 for graphics), ending five straight days of increases. 10 states and the District of Columbia have regular unleaded gas prices of $2 and higher. 40 states have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.510). The cheapest gas prices are in Wyoming ($1.742)

Finally… the smart advice for car buyer's has long been that a well-cared-for, late-model used car is always a better value than a brand new one. But weak sales have led to heavy incentives on new cars. So while a used car is still cheaper than a new one, CNNMoney.com says that in some cases, the price difference will be surprisingly small.


Filed under: Andrew Torgan • Bailout Turmoil • Economy • Finance • Gas Prices • Oil • Wall St.
soundoff (18 Responses)
  1. Sharon S

    I really don't know how all these people got loans, it seems there was a lot of underhanded dealings going on because I went through a bank got a loan and they investigate you thoroughly so they know for a fact how much money you make and can be loaned, so I think Fannie and Freddie not only need to be thoroughly investigated and anyone else who gave outlandish loans to people they KNEW could not afford them!

    This needs to be stopped, if someone did not read the print when they bought a home they should never have been able to buy one!

    This whole thing is beyond ridiculous, and I will say the President and Congress are rewarding BAD BEHAVIOR and trying to cover their own stupid Butts!

    This is wrong, lose your house you couldn't afford it to begin with! Why are these people getting handouts to keep a home they never should have had!
    Give that money to those of us who worked, saved and paid for what we have WE DESERVE IT! THEY DO NOT!

    March 4, 2009 at 8:41 pm |
  2. Sharon S

    Don you are absolutely right, it is just like I said the Government is rewarding BAD BEHAVIOR~!!!

    I think frankly Fannie and Freddie need to be done away with all together! I mean if people are responsible anyone can afford a home they can AFFORD! These two only wanted to give lower income people homes they KNEW they could not afford!

    And yes they will be getting a free ride and as for us, the ones who bought a Home we could afford we are just handing them money but what do we get in return? NOTHING BUT SCREWED you are so right!

    and I thought Obama was against all this handout crap???? Obviously he is well for it!

    March 4, 2009 at 8:33 pm |
  3. Annie Kate

    I agree that people with houses beyond their means should sell and get something that they can actually pay for but in this economy and market right now that may not be possible – not much buying going on out there. I really don't want to pay for more than my own mortgage but I would also like the economy to get better....in the end no matter what we want or don't want, we will have to do something to get the economy going again.

    March 4, 2009 at 8:04 pm |
  4. Don

    I just viewed the Mortgage Help Plan on HUD.GOV, this plan is truly for the financially irresponsible as well as a way to sure up Fannie & Freddie. For individuals such as myself, we are going royally screwed.
    I am upside down on my home value by ( – $200k ), but blessed to be able to pay my mortgage on time; however, there seems to be no relief for me. Someone living next door, who may have brought their home under Fannie Mae or Freddie Mac, can have the their mortgage reduced. When the market recovers they owe less on their property because of the Government bailout money, my TAX dollars and when they sell they receive a great profit. This is a great program, NOT!!!!

    March 4, 2009 at 6:19 pm |
  5. H Bandukw

    This is really not fair!

    I don't have an issue with all these stimulus and mortgage plans. But then what about who already have paid their houses in cash ... now what about them? Why don't people like us gets some favors too who bought everything on cash and lived within their means.

    March 4, 2009 at 5:25 pm |
  6. Sharon S

    Let me say I do feel for those people who have lost jobs and they do need help and I am all for them, but for those idiots who knew they were acting irresponibly they should not get one dime to help them!

    The Government is rewarding BAD behavior and I do not agree with that!

    But for those people who did the right thing and bought homes they could afford and lost their jobs in this ridiculous economy by all means help them keep what they have and need!

    But I DO NOT want to reward Bad Behavior!
    What is this going to teach the children coming up today? Oh its ok to overspend go in debt the Government will get you out????

    March 4, 2009 at 4:11 pm |
  7. mary Frost

    I see that President Obama said that he was going to crackdown on federal spending–well–if he is true to his word, then he'll veto the budget bill that will come to him soon for his signature–Let's see if he is serious about cracking down of just spewing rhetoric.

    March 4, 2009 at 4:08 pm |
  8. Sharon S

    To participate in the loan-modification plan, borrowers must:

    -have obtained their mortgage before Jan. 1, 2009

    -have a primary mortgage of less than $729,500

    -live in the property

    -fully document their income by providing tax returns and pay stubs

    -sign a statement of financial hardship

    -go for counseling if their total household debt (including auto loans, credit cards and alimony) totals more than 55% of their income.

    Ok this is insane! Do you really want to see how many will come up iwth this information and how many of Americans are so far in debt and NEVER should have bought the brand new cars and the way too expensive homes they knew they could not afford!
    So to me this is a bad joke! Let those people learn responsibility too bad their parents didnt' teach them if you don't have the cash to pay for it you don't get it!

    And you can only buy something that is within your price range!

    So what exactly is this going to do for all of us who did the right thing?
    bought homes after SAVING money and bought homes we COULD afford! What perks are in this for me!

    Pissed off YES very, this plan seems to be rewarding bad habits and lack of responsibility for your own actions!

    Pathetic, another Democratic way of GIVING TO THOSE WHO DO NOT DESERVE IT!

    March 4, 2009 at 4:07 pm |
  9. mary Frost

    I am outraged that I have sacrificed, done without and worked hard, only to now be asked to help pay for someone's mortgage that took out one on a home too expensive, KNOWING that they could not pay for it. Also, I'm betting a large portion of the people that are now having trouble paying for the mortgage , lied about how much they made to qualify. That alone should be a disqualifying factor.

    March 4, 2009 at 4:01 pm |
  10. Melissa

    Its about time. The greed of these companies has run rampant for far too long.

    March 4, 2009 at 3:10 pm |
  11. xtina, chicago IL

    -Obama (and Congress) caused this housing downturn. Obama and Congress forced banks to give loans to people with NO MONEY, NO INCOME and NO ASSETS. Oh that's real smart.

    -Who in their right mind buys a house with no money down? That's for advance speculators- NOT the avg. American. Why would you think you can afford a house if you HAVE NO MONEY?!

    -If you sign a document without understanding it, you are NOT entitled to a government bailout.

    -If you sign a document without accepting the worse case scenario detailed in that document, you are in denial and are NOT entitled to a government bailout.

    -Individual Americans – NOT the Congress is responsible for knowing what kind of loan the home buyer is getting. Congress isn't here to hand-hold us through financial decisions.

    -If you've lost your job, you should get help, and I am willing, as taxpayer to do the new mortgage plan thing. But, for future reference, some Americans are NOT READY for home ownership. That would be people without a job, people with no income and people without any assets.

    March 4, 2009 at 2:40 pm |
  12. toadman

    My wife and I are doing fine, currently, paying our mortgage.

    What I'd like to hear more about is the "weatherizing of old homes" that's in the Stimulus package. How will that be dealt with? We live in a home that's over sixty years old, and in great need of modernization and weatherization. Our gas/energy bill is so high in the winter months that we often have to spread payments over a couple of months. I'd get the work done myself, using my own capital, but I'm not in a position to be able to do that, at present.

    March 4, 2009 at 2:32 pm |
  13. Frustrated Renter

    This is ridiculous – so my tax money can go to help someone with a $700,000 mortgage (who might also have another mortgage!), because I realized I could not yet purchase a home and chose to be financially responsible?!? Perhaps that person's home SHOULD be foreclosed and they be forced into *gasp* a home they can afford, or perhaps a rental property. This is the most backward incentive system fathomable, and I imagine other countries laughing at us as the country keeps digging a deeper and deeper hole.

    Seriously, why should the rest of the country bear the (heavy) burden of the irresponsible buyer's big greedy eyes and the irresponsible lender's greed?

    March 4, 2009 at 2:09 pm |
  14. Mrs. Neo, New York City

    This should already be the norm. As far as mortgage's go, people should only get them if they can afford them. That, or housing prices have to be more commiseurate to the median annual salary. Paying over the course of 30 years with a variable rate is hard. We can never forecast that far into the future.

    As for will this affect credit, that's a good question. I doubt it's counterproductive, but just in case I would ask before signing anything. That type of information should be disclosed on the forms.

    March 4, 2009 at 2:01 pm |
  15. Shari Berkey

    I have been struggling for the last 3 years with 3 surgerys in the last 2years.Yes i have health insurance but still have to pay the doctors and copays each time i go to the doctors.i am also on many medicines,my husband has his share of health issues also.I work when i am able to,my husband works as many hours that are in a day. I live in Myrtle Beach S.C. a tourist area. I have been here since 1991. I had to refinance 2-3 years ago.We dont know what happened if we were blindsighted or just desperate,we signed a 30yr mortgage at 9.2% we thought it was 15 yrs. We pay 1,289.63 a month the principal owed is 154,000 and was appraised at 116,000.Yes i am also in credit card debt,because that is the only way i can eat , drive or just live.We do not sit around all day eating bonbonsHow do i get any help.I heve talked to my mortgage company, they are the nastiest people i have ever talked to. They do not care ,they have me crying my eyes out they just want to foreclose on my home or tell me to sell. I cannot sell i have no where to go i have filed for a modification, they say it will take 60-90 days.I cannot believe how they just dont care i dont no what to do or who to turn to,is there any one out there that can help me ? My mortgage company is JPMorgan-chase,PLEASE

    March 4, 2009 at 1:53 pm |
  16. Sandra

    Under NO circumstances should principal balances be reduced. I agree with lowering interest rates, payments and extending the life of the loan to help out, but any and all financial aid given needs to be added to the back of the loan and repaid to the taxpayers when the house is sold. It would NOT be fair for the irresponsible to profit from the taxpayers in the end.

    California is not going to help out with the dwindling new car market. Not since our Liberal run state decided we need to pay 1% more sales tax (up to a whopping 8 3/4% minimum) and they also decided they needed to double our car registration.

    March 4, 2009 at 1:46 pm |
  17. Vivian

    I cannot find the answer to my question and no one seems to be talking about it–how does a loan modification effect one's credit rating? A lot of people have good credit, make their payments and are still underwater on their mortgages. So, will one's credit be destroyed if one takes advantage of the loan modification program? Are we going to end up having millions of people who normally have great/excellent credit suddenly thrust into the poor/good credit rating simply because they are doing the responsible thing by having their mortgage loan modified with this program?

    March 4, 2009 at 1:43 pm |
  18. man

    I had a small trip to the county office to do some researching when I came across a big map posting with red dots marking property tax defaults for auction. I realized I've been so absorbed following the foreclosures being done by banks and lenders that the government ACCORDINGLY ??? are trying to intervene to KEEP PEOPLE IN THEIR HOMES, that I lost sight of these people being kicked out of their homes because THEY CAN'T PAY THEIR PROPERTY TAXES. Do they have recourse on these type of TAKINGS FROM THE GOVERNMENT ??????

    Moreover, properties in California had ballooned to exubering amounts...this OBAMA PLAN FOR THE HOMEOWNERS is far from reaching people in California as it covers only a certain $742K primary mortgage. Any hopes for Californians????????

    March 4, 2009 at 1:17 pm |