For some time now, many economists have been saying that the nation's depressed housing market is the Achilles' heel of the recovery. And many struggling homeowners have been holding out hope for government relief.
President Obama//// seems to be listening. In his weekly address Saturday, Obama called the housing crisis the "single biggest drag" on the economy and said he would follow through on his state of the union pledge to help more people reeling from the housing collapse (see video below).
The president's plan, details of which were released earlier this week, would expand on a government program to allow more homeowners to refinance their mortgages. The new plan would focus on people who are current on their monthly payments and holding on to underwater mortgages owned by banks or investors.
Obama's refinancing program launched in 2009 targeted borrowers with mortgages owned or backed by government agencies Fannie Mae and Freddie Mac, but it has helped a disappointingly small number of homeowners, leaving still millions of borrowers owing more on their loans than their properties are worth. Refinancing would help them take advantage of today's ultra-low interest rates, thereby freeing up cash for spending or allowing them to pay down the principal faster and build equity. The administration has made tweaks to that existing program and is now hoping to extend the refinancing plan to an additional 3.5 million homeowners.
Obama's new plan is estimated to cost $5 billion to $10 billion, but it faces plenty of opposition in Congress and from the financial industry as the president proposes to pay for it by levying a fee on large banks.
In his address Saturday, the president couched his new proposal as part of an effort to shore up the middle class. And while he said he wasn't giving handouts to irresponsible borrowers or those who bought multiple properties, Obama left no doubt where his sympathies lie.
"Lenders sold loans to families who couldn't afford them," he said. "Banks packaged those mortgages up and traded them for phony profits. It drove up prices and created an unsustainable bubble that burst – and left millions of families who did everything right in a world of hurt."
He called it a "small fee" on the largest banks and said it wouldn't "add a dime to the deficit."