President Barack Obama on Wednesday unveiled the next step in his multi-pronged efforts to lift the United States out of recession Wednesday, pledging up to $275 billion to help stem a wave of home foreclosures that sparked the U.S. financial meltdown.
Obama, who Tuesday signed a landmark $787 billion economic stimulus bill mixing government spending and tax cuts, was set to unveil his housing plan formally at 12:15 p.m. EST/1715 GMT in Arizona, a state that has been especially hard hit by the housing crisis.
All of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen, Obama said in prepared remarks released Wednesday.
The U.S. housing crisis has played a central role in the financial and credit turmoil now spread across the globe, with many U.S. homeowners now saddled with mortgages they simply cannot pay.
The depth of the crisis was underlined by data released on Wednesday showing that new U.S. housing starts and building permits dropped to record lows in January, as builders shelved construction plans due to a glut of unsold houses and a slump in demand.
The housing measures were meant to be a more politically popular aspect of Obama's plans to rescue the economy. His administration's measures to shore up the financial industry were met with a dive in stock prices last week.
Obama, a Democrat who succeeded Republican George W. Bush on January 20, battled with opposition Republicans in Congress to pass the stimulus plan, his first major political victory in office.
Leaders of both political parties have called for measures to address the housing crisis.
9 PCT OF HOME LOANS BEHIND, IN FORECLOSURE
At the end of last year, just over 9 percent of all home loans in the United States were in arrears or already in foreclosure, the Mortgage Bankers Association has said.
A total of 8.1 million U.S. homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse.
An Obama administration official said the total plan commits up to $275 billion for housing, including $50 billion from funds already committed in the financial sector bailout plan. It aims to help up to 9 million American families.
Mindful of critics who might charge that the scheme would help people who just took on far more debt than they could afford, Obama said his plan was aimed at rescuing families who have played by the rules and acted responsibly, refinancing traditional mortgages for up 5 million homeowners who now are close to owing more than their homes are worth.
It will also establish a $75 billion fund to reduce monthly payments for another 3 million to 4 million homeowners stuck in sub-prime mortgages they can't afford as a result of skyrocketing interest rates or personal misfortune, Obama said.
(By Caren Bohan and Jeff Mason, Editing by Frances Kerry)