20 Feb 2009

Obama unveils plan for troubled housing market

2:31 am on 20 February 2009

United States President Barack Obama has revealed his plan to try to prevent millions of Americans losing their homes in the housing crisis at the centre of the US financial meltdown.

The plan sets up a $US75 billion fund to subsidise homeowners struggling to pay their mortgages.

It would lower mortgage payments to no more than 31% of the homeowner's income.

The plan will see the Treasury Department double its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to $US200 billion each, in an effort to stabilise the real estate sector.

"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 continue to deepen," Mr Obama said.

Treasury Secretary Timothy Geithner told reporters he expected the plan to work quickly to help the housing market, and that it would bolster efforts to restore the financial system to good health.

US stock prices were lower in early afternoon trading as financial markets reacted sceptically to the plan.

A day earlier, Mr Obama signed a landmark $US787 billion economic stimulus bill mixing government spending and tax cuts.

At the end of last year, just over 9% 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 US homes, or 16% of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse.

The US housing crisis has been at the centre of in the financial and credit turmoil that has spread across the globe.