February 14, 2009 / 12:37 AM / in 10 years

Obama to unveil foreclosure plan, big lenders wait

WASHINGTON/NEW YORK (Reuters) - U.S. President Barack Obama will unveil a plan to stem home foreclosures on Wednesday, a spokesman said, and major U.S. lenders said they had stopped foreclosing until details of the program have been firmed up.

A foreclosed home is shown in Stockton, California May 13, 2008. REUTERS/Robert Galbraith

The Obama administration is still hammering out its plan, but is considering helping borrowers that are not yet behind on their mortgages, sources told Reuters on Thursday. Current programs focus on borrowers that are already delinquent.

Lawmakers and banks are scrambling to fix the U.S. housing crisis, a central element of the current economic downturn.

Bank chief executives said at a Congressional hearing earlier this week that they would agree to temporarily halt foreclosures until the White House can unveil a program to help mortgage borrowers.

White House spokesman Robert Gibbs cautioned Americans against getting too worked up about the mortgage relief plan ahead of Obama’s giving details on Wednesday during a trip to Phoenix, Arizona, seen as an epicenter of the housing downturn.

“I would wait until Wednesday to see what the president offers and be careful that we don’t set an unreasonable series of expectations based on leaks from God only knows where,” Gibbs said.

A Reuters report on Thursday of the Obama administration’s mortgage plans triggered a U.S. stock market rally. On Friday, talk of Obama’s plan initially lifted stocks, but Gibbs’ cautionary statements pushed the market lower, analysts said.

Foreclosures have skyrocketed during the mortgage crisis.

A total of 8.1 million homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a Credit Suisse report in December.

The National Association of Realtors said on Thursday that sales of foreclosed homes helped drag the median price of existing homes to its lowest level since 2003.

U.S. Treasury Secretary Timothy Geithner on February 10 had announced a plan to stabilize the financial system, which includes $50 billion of assistance to “prevent avoidable foreclosures” of middle-class homes occupied by their owners, according to a document Geithner released.

Bank of America Corp, Citigroup Inc, Fannie Mae, Freddie Mac, Goldman Sachs, JPMorgan Chase & Co, Morgan Stanley and Wells Fargo & Co all said on Friday they had stopped putting any new mortgages into foreclosure until they have more details about the program.

DENVER, PHOENIX

Bank of America said its moratorium will last at least three weeks and applies to mortgage loans owned and serviced by the bank as well as Countrywide Financial Corp, the lender it acquired in July.

Citigroup said its moratorium, which started on February 12, will last until either Obama has finalized the details of a program for modifying mortgages or until March 12, whichever comes first. It applies to mortgages that Citi owns covering borrowers living in their homes.

Fannie Mae and Freddie Mac said they will suspend foreclosures through early March.

Goldman Sachs did not provide an end date for its moratorium, which a spokesman said began earlier this week on owner-occupied home loans the firm owns.

JPMorgan said its moratorium will last through March 6, which it believes is enough time for the Treasury to announce a new mortgage modification plan.

Morgan Stanley’s moratorium started this week, and will last until March 6, a spokeswoman said. It applies to the bank’s Saxon unit, which collects payments on loans.

Wells Fargo — which had already set a moratorium until the end of February for the Pick-a-Payment mortgage portfolio inherited from Wachovia — on Friday extended the timeline for those customers and also halted foreclosures on all other home loans it owns until the government announces its plan.

Obama will be in Denver, Colorado, on Tuesday to discuss the economic recovery plan.

Additional reporting by Elinor Comlay, Juan Lagorio, Al Yoon and Dan Wilchins in New York, and Ross Colvin and Patrick Rucker in Washington; Editing by Lisa Von Ahn, Brian Moss, Gary Hill

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