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(AP) - Seeking to tackle "a crisis unlike any we've
ever known," President Barack Obama unveiled an ambitious $75
billion plan Wednesday to keep as many as 9 million Americans from
losing their homes to foreclosure.


      Announcing the plan in Arizona -- a state especially hard hit by
the housing crunch -- Obama said that turning around the battered
economy requires stemming the continuing tide of foreclosures. The
housing crisis that began last year set many other factors in
motion and helped lead to the current, widening recession.


      "In the end, all of us are paying a price for this home
mortgage crisis," Obama said at a high school outside Phoenix.
"And all of us will pay an even steeper price if we allow this
crisis to deepen."


      But while talking in broad strokes about the importance of the
issue to the economy as a whole, the president took care not to
miss the pain that the housing problems are causing in individual
families.


      "The American Dream is being tested by a home mortgage crisis
that not only threatens the stability of our economy but also the
stability of families and neighborhoods," he said. "While this
crisis is vast, it begins just one house and one family at a
time."


      More expensive than expected, Obama's plan aims to keep between
7 million and 9 million people from foreclosure. Of the nearly 52
million U.S. homeowners with a mortgage, about 13.8 million, or
nearly 27 percent, owe more on their mortgage than their house is
now worth, according to Moody's Economy.com.


      Headlining Obama's plan is a $75 billion Homeowner Stability
Initiative, which would provide a set of incentives to mortgage
lenders in an effort to convince them to help up to 4 million
borrowers on the verge of foreclosure. The goal: cut monthly
mortgage payments to sustainable levels, defined as no more than 31
percent of a homeowners income. 

Funding would come from the $700
billion financial industry bailout passed by Congress last fall.


      Another key component would specifically help those said to be
"under water" -- with dwellings whose market value have sunk below
the principal still owed on the mortgages. Such mortgages have
traditionally been almost impossible to refinance. 

But the White
House said its program will help 4 million to 5 million families do
just that -- if their mortgages are owned or guaranteed by Fannie
Mae or Freddie Mac.


      Housing Secretary Shaun Donovan stressed that homeowners don't
need to be delinquent in order to get help.


      "This is necessary policy. It's smart economics. And it's just
and fair," Treasury Secretary Timothy Geithner told reporters.


      Asked why the cost had jumped to $75 billion from initial talk
of a $50 billion effort, Geithner said, "We think that's necessary
to make a program like this work."


      And he said relief would be almost instantaneous, basically as
soon as rules are published March 4. 

"You'll start to see the
effects quite quickly," Geithner said.


      Sheila Bair, chairman of the Federal Deposit Insurance
Corporation, said previous efforts had largely flopped. 

"We've not
attacked the problem at the core," she told reporters. "We are
woefully behind the curve."


      The biggest players in the mortgage industry already had halted
foreclosures pending Obama's announcement.


      "The plan I'm announcing focuses on rescuing families who have
played by the rules and acted responsibly," Obama said. "It will
not rescue the unscrupulous or irresponsible by throwing good
taxpayer money after bad loans."


      He issued a warning as well: "All of us must learn to live
within our means again."


      He said the plan will not help those who took risky bets by
buying homes to sell them, not live in them, or dishonest lenders
who distorted facts for naive buyers, or buyers who signed on for
loans they knew they could not afford.


      "This plan will not save every home," Obama said.


      In tandem with the foreclosure plan, the Treasury Department
announced it would double the size of its lifeline to Fannie Mae
and Freddie Mac, seeking to bolster confidence in the mortgage
giants effectively taken over by the government last fall. 


The
government said it would absorb up to $200 billion in losses at
each company, by using money Congress set aside last year, and will
continue purchasing mortgage-backed securities from them.


      The Treasury said the increased support for Fannie Mae and
Freddie Mac didn't reflect projected losses at the two companies.
The two companies are currently projected to need a combined
government subsidy of about $66 billion, well short of the new
promise of up to $400 billion.


      Asked about the doubling of the guarantees for Fannie and
Freddie, Geithner said: "This is not a judgment about the expected
losses ahead. It underscores commitment, and that is very important
to help keep mortgage rates low." 


Geithner said most not all of
the money would come the financial bailout fund.


      The president's announcement came a day after he signed into law
a $787 billion economic stimulus plan he hopes will spark an
economic turnaround and create or save 3.5 million jobs.


      At the same time, the administration was grappling with the
darkening prospects for the U.S. auto industry.


      Even as Detroit carmakers submitted restructuring plans to
qualify for continued government loans, General Motors Corp. and
Chrysler LLC asked for another $14 billion in bailout cash.
      

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Business and Economic News

Seeking to tackle "a crisis unlike any we've
ever known," President Barack Obama unveiled an ambitious $75 billion plan Wednesday to keep as many as 9 million Americans from losing their homes to foreclosure.

Obama unveils $75 billion mortgage relief plan

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