WASHINGTON — Against a backdrop of record-low new- home sales and ballooning losses from foreclosures, Housing Secretary Shaun Donovan told lawmakers Thursday that the lending industry is set to launch the Obama administration’s $75 billion foreclosure-prevention program next week.
Final details will be released Wednesday, but Donovan said the plan will allow borrowers with big debts from car loans, credit cards and unaffordable mortgages to have their home loans modified to lower the monthly payment, even if they are not in default.
Borrowers who owe up to 5 percent more than their home’s current value will be able to refinance, if their mortgages are held by mortgage-finance companies Fannie Mae or Freddie Mac. At the same time, loan modifications will be available for borrowers who owe up to 50 percent more than their home’s current value, Donovan said.
Testifying before Senate lawmakers, Donovan said “we expect to see large numbers of modifications happen very quickly,” and that he hopes it would cause foreclosure rates to drop as soon as April.
Hours later, Fannie Mae reported a loss of $25.2 billion for the fourth quarter and said it is asking the government for $15.2 billion in aid as the U.S. housing market worsens. This is the first time Fannie Mae has asked for government money, but the Treasury Department last week said it is doubling the lifeline for Fannie Mae and Freddie Mac to $200 billion each.
The Commerce Department reported Thursday that new- home sales fell 10.2 percent to a seasonally adjusted annual rate of 309,000, the worst showing on records going back to 1963. It also was weaker than economists expected and shattered the previous all-time monthly low set in September 1981.
The median sales price fell to $201,100 in January, a record 9.9 percent drop from the previous month. The median price is the midpoint, where half sell for more and half for less.
