More gov’t help to homes underwater
TEXT OF INTERVIEW
Steve Chiotakis: Later today, the Obama administration will announce a new plan to prevent foreclosures. Now right now there are about 11 million homeowners who owe more than their house is worth, so-called underwater homes. And Marketplace’s Brett Neely is in our Washington studio with the details. Good morning Brett.
Brett Neely: Good morning, Steve.
Chiotakis: How’s this plan supposed to work?
Neely: Well, the government wants to offer voluntary refinancing to some borrowers with those underwater mortgages. That could lower payments further for homeowners who are already stretched pretty thin. The plan would also require lenders to temporarily cut payments for unemployed homeowners.
Chiotakis: And we heard earlier this week that Bank of America said it was going to cut the principal on some of those underwater mortgages. Is anything like that in the works here, Brett?
Neely: Yes, it is — but remember first, Bank of America’s plan was pretty limited and will only cover about 45,000 homeowners. The government’s plan could help more people but it won’t force banks to reduce principal. It’s just encouraging them to write down some of those troubled mortgages.
Chiotakis: And there was government watchdog report just a few days ago saying that the administration’s efforts on this front haven’t really been that successful so far. I mean, how is this plan any different?
Neely: Well it is a signal that the administration realizes its approach hasn’t worked. And this starts to tackle the problem of some homeowners walking away from their houses because they owe more than the house is worth. And it’s also a way to help the unemployed at a time when joblessness is up still around 10 percent. But we don’t have any numbers yet on how many borrowers will be covered by this new plan, and until we know that, it’s hard to say what kind of impact this program could have.
Chiotakis: All right. Marketplace’s Brett Neely reporting from Washington. Brett, thanks.
Neely: Thank you, Steve.
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