REUTERS

WASHINGTON PRESIDENT Barack Obama on Wednesday proposed a multi-billion-dollar package to help US homeowners refinance and stave off foreclosure, part of an election-year push that is likely to face an uphill battle by the Republican opposition in Congress.

Obama moved to counter Republican criticism that the proposal would use taxpayer money to bail out irresponsible borrowers by stressing that only homeowners current on their payments could benefit. The president had sketched out the plan in his State of the Union address last week.

Home values have dropped 33 percent from their 2006 peak and nearly 11 million Americans now owe more than their homes are worth. Millions more have lost their homes in states that are up for grab in November’s presidential election.

The White House is seeking to contrast Obama’s stance with that of Republican presidential front-runner Mitt Romney, who has said foreclosures should be allowed to run their course.

“The truth is, it will take more time than any of us would like for the housing market to recover from this crisis,” Obama said at a community centre in Falls Church, Virginia. “But there are actions we can take, right now, to provide some relief to folks who’ve been making their payments on time.” The $5 billion to $10 billion programme that would be funded by a tax on the nation’s largest banks, would allow homeowners to refinance at record low borrowing costs through government- backed loans. A senior administration official said it could reach 3.5 million Americans whose loans are not governmentguaranteed.

An additional 11 million homeowners whose loans are backed by Fannie Mae and Freddie Mac could also be eligible, the official said.

The Federal Housing Administration would run the programme — another sticking point for Republicans, who are worried about the agency’s solvency.

The FHA has been hard hit by mortgage defaults, and Republican lawmakers have warned it could eventually need a taxpayer bailout.

Republicans also have rejected Obama’s call to pay for the programme with a bank tax that Congress has turned down twice before.

“Rather than increase the government’s stranglehold on our nation’s housing finance system, we need to dial it back,” said Republican Representative Scott Garrett of New Jersey.

Obama’s plan would allow borrowers to refinance even if they owe far more than their homes are worth. Many homeowners have not been able take advantage of current record-low mortgage rates because the value of their homes has fallen and lending standards have tightened.

The White House said the programme could save borrowers an average of $3,000 a year. It would be open to homeowners who have been current on their payments for the last six months and who have not missed more than one payment in the prior six months.

Applicants would need to occupy their home and have a credit score of 580 or higher to be eligible for the programme.

Only loans that fall beneath the FHA lending cap, which reaches as high as $729,750 in some high-cost markets, would be eligible.

“Government certainly can’t fix the entire problem on its own. But it is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom,” Obama said.