WASHINGTON (Reuters) ? President Barack Obama on Wednesday pressed lawmakers to back a $5 billion to $10 billion plan to help U.S. homeowners refinance, part of an election-year package that is unlikely to overcome Republican opposition in Congress.
Obama moved to counter Republican criticisms 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.
Nearly 11 million Americans are underwater on their mortgages, meaning they owe more than their homes are worth. Millions more have lost their homes in states that are up for grabs in November's presidential election.
The program would seek to move homeowners who have been locked out of refinancing into government-backed loans. A senior administration official said it could reach 3.5 million Americans who are not in currently in government-guaranteed loans. An additional 11 million homeowners whose loans are backed by Fannie Mae and Freddie Mac could also be eligible, the official said.
"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 center 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 White House is seeking to contrast Obama's stance with that of Republican presidential front-runner Mitt Romney, who has said U.S. foreclosures should be allowed to run their course.
The next contest in the state-by-state battle for the Republican presidential nomination is in Nevada, the state that has had the highest foreclosure rate in the nation in each of the last five years.
Nevada is seen as a potential swing state in the presidential elections, as is Florida, which has also been hard-hit by foreclosures.
The Federal Housing Administration would run the program -- another sticking point for Republicans. The FHA has been hard hit by mortgage defaults, and Republican lawmakers have warned it could eventually need a taxpayer bailout.
Republicans have also rejected Obama's call to pay for the program 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, who heads a House of Representatives subcommittee that oversees housing finance.
HELPING UNDERWATER HOMEOWNERS
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 prices of their homes have fallen and lending standards have tightened.
The White House said the program 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.
The administration also said it would ask Congress to broaden the existing Home Affordable Refinance Program, which seeks to help underwater borrowers with loans backed by Fannie Mae and Freddie Mac win new loan terms. It said the regulator that oversees Fannie Mae and Freddie Mac had not done enough to make the program accessible.
Together, Fannie Mae, Freddie Mac and the FHA own or guarantee nine out 10 new U.S. home loans.
The administration also called for a single set of federal standards for the mortgage servicing industry, including simple mortgage application forms and greater efforts to assist borrowers facing foreclosure.
Obama also highlighted an effort the administration has undertaken with the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, to convert foreclosed properties held by the two government-controlled firms into rental units.
FHFA said on Wednesday that investors could now sign up to prequalify to bid on properties under the program, and said it would kick off a pilot phase soon.
Last week the Obama administration called on FHFA to allow Fannie Mae and Freddie Mac to reduce loan principal for struggling homeowners, in an effort to widen the reach of its main foreclosure prevention program -- the Home Affordable Modification Program
When it launched the program in 2009, the administration said it would help as many as 4 million Americans. So far, only about 900,000 households have won permanent mortgage relief under the program.
"I'll be honest - it didn't work at the scale we'd hoped," said Obama.
(Additional reporting by Laura MacInnis and Alister Bull; Editing by Tim Ahmann and Andrea Evans)
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