The plan will give approximately $75 billion in direct funding to help homeowners maintain possession of their homes, and the remaining $200 billion to back the government-controlled lenders Fannie Mae and Freddie Mac. The plan has three parts. The first part is to help homeowners who are current on their payments, but are paying at high interest rates and who cannot refinance because of low home equity. The second part of the plan will provide incentives to lenders who change the loan terms in order to help the nearly 4 million people who are in danger of losing their homes; President Obama is also going to create a program that will subsidize a family's monthly mortgage payment to the point where the payment would be as little as 31% of the family's gross monthly income. The third part is to give $200 billion to the mortgage companies Freddi Mac and Fannie Mae in an attempt to create an increase in the amount of available credit for current and potential homeowners.

The values and belief systems that are present in this ideology are that the federal government exists to help out average people in times of need, that people are not necessarily completely responsible for their own living conditions, and that the economy can be restored back to normality if average people are given a helping hand. It is impossible to discern the intent of the policymakers behind this decision; for example, are they creating this policy to help out the mortgage giants, to look good to the voters so that they can be re-elected, or are they doing this out of the goodness of their hearts because they believe in helping out the common man? It is impossible to tell which of these is true, but this probably is being created probably for all of the reasons to varying extents.

The most obvious influence for this policy is that the housing market is in complete crisis. Every homeowner and mortgage company was, is still, and will be facing severe problems in this sector of the economy. Mortgage giants are going bankrupt because of irresponsible lending practices, and average homeowners are losing their homes because of other problems in the economy which are making home payments difficult. It was difficult to find policy in the newspaper that directly related to the clients the Red Cross serves and the services it provides, so I chose this route, which is a bit of a stretch, but nonetheless some of our clients, the general public, will be affected by this issue. If some of our clients were the victims of some sort of home-related disaster, such as a fire, and they did not have homeowner's insurance, for example, it may be very difficult for them to find the finances necessary to afford a home. Also, some of the elderly and disabled clients we have served who are lucky enough to have homes may be forced into apartments or other undesirable living circumstances because of foreclosure. Finally, the general public, our most common client, faces this problem on a much broader scope.

Judging by the commentary in the article, this policy, like many, seems to be a mixed bag. Looking at it from a very broad perspective, it seems that this policy will make life easier for millions of people in that it will help them to retain their homes, or that it will provide additional funding which will help make the financial lives of the people easier because of all the other expenses they face.

One point that this article notes is that the mortgage giants still have the final word on whether or not to put somebody through foreclosure. Even if the government subsidies provided to the lender and the borrower help to reduce the borrower's payment to the point where the borrower can afford the payment, and even if the lender reduces fees far enough to receive government subsidies, the lender still can foreclose the mortgage if it feels that is a financially more beneficial route than reducing fees and accepting government subsidies. To me, this means that basically the mortgage giants can keep all the money for themselves if they want to and just foreclose every single home, although it probably will not be that extreme, but very likely many people will have their homes foreclosed by selfish mortgage giants who only value the bottom line.

The two positives about the plan are 1) that it allows families whose mortgage debt is 80-105% of its home value refinance to a lower interest rate, which could save a couple thousand dollars for each family in a year, and 2) that anyone who is under water (has a mortgage debt greater than 105% of the market value of the home) can modify their mortgage payments so that the payments are 31% of the family's gross monthly income. This part of the plan would also apply to families who have had a job loss and are unable to make their monthly payments.

The final two positives show to me that this plan is an attempt by President Obama to help out those families who are in great need of help due to circumstances outside of their own control. However, the first point that I noted, namely that the mortgage giants have ultimate control of who is foreclosed and who is not, means that it really depends on how the people who actually make the decisions affecting these homeowners have control of how this policy actually ends up working, which may or may not be a good thing. It would seem better, to me, to let the Federal Government be in charge of that determination, as they are an outside party to the issue.

Overall, it seems to be a good attempt at helping those in need, however, I think that this policy will end up being a mixed bag in reality because of the people who are in control of the homeowners' situations.

Dan Stelter

http://www.anxietysupportnetwork.com

Bibliography

Stolberg, S.G., & Andrews, E.L. (2009, February 19). $275 Billion plan seeks to address crisis in housing. The New York Times, pp. A1, A14.

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