Housing Secretary Shaun Donovan said Thursday it's critically important that banks and lending institutions "step up to the plate" to help make certain the Obama administration's new home foreclosure initiative succeeds.
"This started as a mortgage crisis but it's become a jobs crisis," said Donovan, speaking a day after President Barack Obama announced a $75 billion program aimed at a problem many analysts say has been at the heart of the country's economic tailspin.
In addition to the new mortgage lifeline for millions of Americans on the brink of foreclosure, the administration on Wednesday announced an additional $200 billion in government assistance to mortgage giants Fannie Mae and Freddie Mac, the largest makers of home mortgages in America.
It's all part of a stepped-up effort to encourage lending institutions to refinance homes for millions of homeowners considered to be "under water" — properties held by people whose mortgage payments exceed the value of their homes in the depressed housing market.
Interviewed Thursday on NBC's "Today" show, Donovan said the administration feels certain there are sufficient requirements to ensure heavy bank refinancing, saying that could "tip the balance for millions of homeowners."
Sheila Bair, chairman of the Federal Deposit Insurance Company, said: "There will still be some borrowers who lose their homes to foreclosure. Some of that will be inevitable. But this should have a significant reduction in the foreclosure rate, bringing it more in line with historical levels."
Bair, who appeared on ABC's "Good Morning America," said that as a person making regular mortgage payments herself, she understands the resentment of homeowners with safe loans who feel others are being rewarded for risky behavior. She said, however, that the plan would help many, but not all, and that's appropriate at a time of plunging home prices.
"Is it fair to everyone? Perhaps not," she said. "But I think frankly we're beyond that."
Bair refused to predict when home prices might stabilize, but said she hoped the loan modifications beginning in March would temper the ongoing declines.
Donovan said mortgage refinancings under one key part of the program would be available only to people with good credit.
But he also said that "there are clearly a number of homeowners around the country who won't benefit and shouldn't benefit," saying he was referring in part to "investor owners" — people who bought properties they never occupied.
Copyright 2009 The Associated Press.