In a speech today in Manhattan, Democrat Barack Obama said the government has to "confront the housing crisis" to help end it.
He said the way to do this is to give lenders incentives to buy out upside-down mortgages and convert them to new fixed-rate loans homeowners can afford:
"Over two million households are at risk of foreclosure and millions more have seen their home values plunge. Many Americans are walking away from their homes, which hurts property values for entire neighborhoods and aggravates the credit crisis. To stabilize the housing market and help bring the foreclosure crisis to an end, I have sponsored Senator Chris Dodd's legislation creating a new FHA Housing Security Program, which will provide meaningful incentives for lenders to buy or refinance existing mortgages. This will allow Americans facing foreclosure to keep their homes at rates they can afford."
What Obama's really doing is carving out a moderate position on the real estate meltdown that clearly differentiates him from both Republican John McCain (opposes government bailouts) and Democrat Hillary Clinton (who proposed freezing foreclosures and creating a $30 billion fund to buy up distressed properties). Obama would spend his $30 billion like this: $10 billion to help bail out distressed homeowners, $10 billion to the 19 states whose expected budget shortfalls could lead to higher taxes and reduce services and $10 billion to prop up the unemployed.
