ARIZONA DAILY STAR/AP: Thurs., Feb. 19, 2009

Obama's housing plan

By J.W. Elphinstone and Alan Zibel

1. "Underwater" refinancing: Obama's plan aims to help an estimated 4 million to 5 million homeowners who have lost substantial value in their homes by opening them up to refinancing at lower interest rates. To do that, the administration will remove restrictions on Fannie Mae and Freddie Mac that currently don't allow "underwater" homeowners to refinance.

2. Lower monthly payments: Obama wants to help homeowners reduce their payments to no more than 31 percent of their income, something that could impact an estimated 4 million people. To get the ball rolling, if lenders reduce payments to levels that a homeowner can afford, the government will make up part of the difference.

3. Stabilize the market: The Treasury Department will double its funding to Fannie Mae and Freddie Mac in an effort to strengthen those institutions, using $200 billion from the bailout package approved by Congress last year.

4. Bankruptcy reform: While much of Obama's plan can take effect without congressional action, a more controversial effect will need such action: Changing bankruptcy rules to allow judges to reduce home mortgages. Congressional Republicans opposed that move, saying it would increase interest rates.

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