Obama’s Plan to Reduce Foreclosures

17 02 2009

President Obama’s plan to reduce the flood of home foreclosures will include a mix of government inducements and new pressure on lenders to reduce monthly payments for borrowers at risk of losing their houses, according to people knowledgeable about the administration’s thinking.

The plan, to be announced Wednesday, is expected to include government subsidies for reducing a borrower’s interest rate, which a lender would have to match with its own money.

But officials cautioned that subsidies for lower interest rates would not in themselves help many troubled homeowners, because lenders were still likely to view many of those borrowers as bad risks and refuse to restructure their loans. As a result, they have been casting about for sticks as well as carrots to persuade the lenders to take part.

Exactly what kind of pressure Mr. Obama would bring to bear remains unclear. One possibility is a stepped-up effort to enact legislation that would give bankruptcy judges new power to restructure mortgages and reduce a borrower’s payments.


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