Business
Obama offers home owners a lifeline
Barack Obama, faced with 14 million unemployed workers and a jobless rate that won’t budge, is tackling the U.S. economic crisis by focusing on where it began: the housing market.
The White House threw a lifeline on Monday to millions of frustrated middle-class homeowners who are struggling to pay their mortgages and who now owe more than their homes are worth. A new government program will allow them to refinance their loans at lower rates with less difficulty than before, putting more money in their pockets in the hope that they will spend it and give the economy a much-needed boost.
The move comes at a time when many economists are seizing on the U.S. housing bust as a major reason the world’s largest economy is recovering so slowly from a recession that ended more than two years ago, and why the labor market has been so slow to heal from that event. More than six million people in the U.S. have been unemployed for longer than six months.
Interest rates have plunged in recent months, thanks to a poor economic outlook and relatively low inflation. But millions of Americans with relatively clean credit histories are stuck paying higher interest rates than currently available because their mortgages were struck prior to the housing correction. They are unable to take advantage of lower rates because a drop in real estate values has left them owing more on the house than its appraised value, meaning few banks want to issue a new loan.
That has left them paying hundreds of dollars more a month in payments than necessary, and has forced tens of thousands of homeowners to sell their homes at a loss when their mortgages come due because they can’t strike a deal with a lender on a new mortgage.
The White House’s plan makes it easier for them to both stay in their houses and have more disposable income. “However many homeowners are going to be helped by this, they will be very grateful for the assistance that will allow them to refinance at today’s low rates,” White House spokesman Jay Carney said Monday.
