Obama Announces $275 Billion Homeowner Affordability and Stability Plan

Speaking today in Arizona, a state that has been hit hard by the housing downturn -- it has the third-highest foreclosures in the country, President Obama announced a $275 billion plan aimed at stabilizing the tumultuous housing market and staving off foreclosure for as many as 9 million homeowners. 

The Homeowner Affordability and Stability Plan will enable millions of Americans, who due to falling home prices now owe more than 80 percent of their home's value, to refinance mortgages that were owned or backed by Freddie Mac or Fannie Mae, resulting in lower monthly payments.

The plan will also provide incentives to mortgage servicers who work with borrowers in good-standing and will provide incentives to borrowers who keep current with their payments, and it will work to shore up Fannie Mae and Freddie Mac. The plan will not utilize TARP or ARRA funds. 

For more information on the Homeowner Affordability and Stability Plan:

Download Homeowner Affordability and Stability Plan Fact Sheet

For answers to frequently asked questions about the Homeowner Affordability and Stability Plan:

Download Q&A on Homeowner Affordability and Stability Plan

Read President Obama's speech today about the home mortgage crisis:

Download President Obama's Remarks

How the Stimulus Package Affects Homeowners and Homebuyers

Congress passed the $787 billion economic stimulus package over the weekend, and President Obama will sign it into law tomorrow. Although every American is affected in different ways by the various facets of the plan, certain aspects impact homeowners and homebuyers more directly:

• $212 Billion in Tax Cuts – Among these, the “Making Work Pay” credit will return as much as $400 to individuals (earning less than $95,000 annually) and up to $800 to families (earning less than $190,000) in each of the next two years.
• Home Purchase Tax Credit – An $8,000 credit toward the purchase of a home between now and the end of 2009. Individual homebuyers must make less than $95,000 or have a family income of less than $170,000 and must not have owned a home for at least three years.
• Energy Efficiency – $5 billion will go toward weatherizing homes to make them more energy efficient and therefore less expensive to own. An additional $4.4 billion will go to creating smart grid projects that help control energy use, and $300 million will go to development of smart appliances that enable homeowners to control their energy usage further.
• Environmental Impact – $6 billion is earmarked for improvements to local water infrastructure and another $6 billion will go towards the local cleanup of former weapons-production and energy-research sites. Rural homeowners will see nearly $5.4 billion in funding and loans dedicated to water and waste-disposal facilities in their areas. 
• Housing and Neighborhood Assistance Programs – The Department of Housing and Urban Development (HUD) will receive more than $13 billion for housing and assistance programs.
• Jobs – Millions of homeowners have lost their homes when they’ve lost their jobs in the last two years and have been unable to pay their mortgages.  One of the key aspects of the plan was to put Americans back to work, enabling them to pay their mortgages and helping to stem the tide of foreclosures.  Implementing the projects that are outlined in the stimulus package will save or create millions of jobs in transportation, education, construction, health care, technology, science and the military.

So what is your take on the stimulus package? Do you think it will work? Is it too much/enough/not even close? Is it a good use of your taxpayer money? We want to hear your thoughts in the comments section below.

Economic Stimulus Package Nears Passage

Congressional leaders are readying the $790 billion economic stimulus package for a vote with hopes of having the bill signed into law by Monday's President's Day holiday.

Although the details are not available, the package will include tax breaks for individuals and businesses; investments in health care and alternative sources of energy; funding for immediate-impact infrastructure projects; and aid to state and local governments, including expanded unemployment benefits and assistance for those without health insurance.

According to today's Washington Post: "Many details of the package remained elusive last night, but initial calculations showed that the bill includes $282 billion in tax breaks, including a temporary fix to the alternative minimum tax and a new tax credit for home buyers, although it was drastically reduced from the Senate-passed version. Spending for highways, bridges and other transportation projects is nearly $50 billion. The measure would provide an additional 20 weeks of unemployment payments and health-care subsidies for people who are out of work. Social Security recipients would receive an additional $250 payment, and the federal government's contribution to the Medicaid program would increase dramatically."

The mere promise of passage in the near future has already had a positive influence: Caterpillar, which makes construction equipment, reported it will hire back 20,000 of its recently laid-off employees.

Senate Adds Homebuyer Tax Credit to Stimulus Package

Hoping to jump-start the struggling U.S. housing market, the Senate added an amendment to its $900 billion economic stimulus bill yesterday that would provide up to $15,000 in tax relief for homebuyers who purchase a primary residence in the first year of the stimulus plan’s inception.

Although a stimulus package passed the House on strictly partisan lines, to pass the Senate it will require bipartisan support. The homebuyer tax credit represents a nod towards the priorities of Republican lawmakers, who want to see increased help for the housing sector included.

The amendment will add $19 billion to an already ballooning stimulus package. So what do you think? The housing market has been hard hit by widespread foreclosures, plummeting values and frozen credit markets. Will this be the necessary shot in the arm? What else would you like to see included in the plan?

Consumer Spending Drops For Sixth Straight Month

On the heels of the House of Representatives’ passage of an $819 billion stimulus bill last week, the Commerce Department reported yesterday that consumer spending for the last month of 2008 was as bad as we expected, maybe worse.

Nervous consumers continued to hold on tight to their cash in December, marking the sixth straight month that that spending has dropped. Consumers spent $102.4 billion less in December, or 1 percent less than the month before, while at the same time, the savings rate rose from 2.8 percent to 3.6 percent.

As consumers have retreated, retailers are falling like dominoes. Circuit City and Linens 'N Things have gone out of business. Yesterday, Macy’s became the latest retailer to announce large-scale layoffs – 7,000 nationwide – joining Home Depot, Target, Starbucks and Best Buy, all of whom recently announced layoffs or store closures. Additionally, even with the holidays to bolster year-end sales, toymaker Mattel reported its fourth-quarter profits plunged 46 percent from the same period in 2007.

The pain is being felt across the board, not just in the retail sector. Manufacturing is continuing to contract, and reflected by the mass layoffs announced by Caterpillar last month, demand for residential construction has dropped considerably. Residential construction spending dropped by 22.3 percent in 2008, the Commerce Department reported.

Are you putting more into your savings account? What purchases have you cut out? Tell us in the comments section below.