Obama to the rescue!

The US government is working on a landmark plan that could see struggling mortgage-holders having their monthly payments subsidised in an attempt to kick-start a recovery in the American housing market...

President Barack Obama is working on a new plan to rescue the US housing market. The plan is expected to sit at the heart of the Obama administration's programme to revive the housing market. US Treasury Secretary Tim Geithner has already allocated $50bn of bail-out funds towards the plan.

The news helped US stock markets erase their losses in the final hour of trading and also give a lift to markets in Asia. The Dow Jones Industrial Average closed down 6.77 points at 7932.76, while the Standard & Poor's 500 rose 1.45 to 835.19.

Under the plan, which is understood to be the subject of discussion between senior players in President Obama's administration, homeowners who fear they can't pay their mortgage would be able to receive a subsidy before they begin missing payments.

Significant Change of track

The move would be a significant Change of tack from current measures designed to assist homeowners, where help can usually only be obtained once payments have been missed. Some 2.3m Americans fell behind with their mortgage payments last year, as the worsening economy added more pressure on the US housing market.

It is understood that the proposals would see mortgage companies using a form of eligibility test even before a borrower becomes delinquent, assessing the actual value of their home and their ability to afford the mortgage.

Although it's not clear how many people could be affected by the plan, or what value of mortgages would be subsidised, it is known that federal mortgage agencies Fannie Mae and Freddie Mac would play some form of supporting role but would not expand their securitisation of loans.

Federal Housing Finance Agency regulator James Lockhart - who regulates Fannie and Freddie - said that the mortgage finance industry is keen to standardise mortgage modification.

Source: www.telegraph.co.uk

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