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If you are interested in what The Homeowner Affordability and Stability Plan has in store for you, we have it hot off the presses. President Obama is making a speech in Mesa, Arizona today to outline his plans for rescuing the real estate market.

A couple of asides that I have noticed.

First, the spigots on lending are being reopened. Freddie Mac and Fannie Mae are going to be infused with cash from the Treasury to the tune of 200 billion dollars. Expect lending requirements to be lowered.

Then there is going to be a push to mitigate the foreclosures through government pressure on banks to rework the mortgages and the introduction of mortgage reductions in the bankruptcy process.

Also, Obama says he will keep rates down for the middle class.

Now, let me add a little perspective for this. Banks will need to make a profit on the mortgages they are writing. So banks will need to meet the following criteria according to Obama’s plan:

• having to absorb more loans that will be re-worked, l
• ower interest rates,
• higher risk in the lending standards,
• and the risk of a bankruptcy judge re-writing the mortgage instrument.

Count me as a simpleton, but do you think that the only way that this can be accomplished is by nationalizing the banking system and removing the profit motive?  Oh wait, Obama already is…

Excepts from President Obama’s speech  on the The Homeowner Affordability and Stability Plan:

First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.

Second, we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.

Sub-prime loans – loans with high rates and complex terms that often conceal their costs – make up only 12 percent of all mortgages, but account for roughly half of all foreclosures.

Third, we will take major steps to keep mortgage rates low for millions of middle class families looking to secure new mortgages.

… Therefore, using the funds already approved by Congress for this purpose, the Treasury Department and the Federal Reserve will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities so that there is stability and liquidity in the marketplace. Through its existing authority Treasury will provide up to $200 billion in capital to ensure that Fannie Mae and Freddie Mac can continue to stabilize markets and hold mortgage rates down.

Fourth, we will pursue a wide range of reforms designed to help families stay in their homes and avoid foreclosure.

My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value – as long as borrowers pay their debts under a court-ordered plan. That’s the rule for investors who own two, three, and four homes. It should be the rule for ordinary homeowners too, as an alternative to foreclosure.

In addition, as part of the recovery plan I signed into law yesterday, we are going to award $2 billion in competitive grants to communities that are bringing together stakeholders and testing new and innovative ways to prevent foreclosures. Communities have shown a lot of initiative, taking responsibility for this crisis when many others have not. Supporting these neighborhood efforts is exactly what we should be doing.

Taken together, the provisions of this plan will help us end this crisis and preserve for millions of families their stake in the American Dream. But we must also acknowledge the limits of this plan. Excepts of  the Text of Obama’s speech in Mesa.

Much more at the Phoenix Real Estate Guy blog.

Related posts:

1. Obama Foreclosure Plan – Pie in the Sky or Practical Solution
2. What Is The New Obama Plan For Housing?
3. South Carolina Blocks Foreclosures Until Housing Plan Enacted
4. How Will Fannie and Freddie Deal With The Second Mortgages?
5. Federal Reserve Initiates 9.9 Billion Dollar Loan Modification Plan