WASHINGTON — Facing millions of foreclosures and high unemployment, President Barack Obama on Friday announced a $1.5 billion fund to help unemployed homeowners and other struggling borrowers in a handful of states.
"What we can do is help families that have done everything right to stay in their homes, and we can stabilize the housing market so that home values can begin rising again," Obama said at a town hall meeting in a Las Vegas suburb.
Five states — Arizona, California, Florida, Michigan and Nevada — have home prices that have fallen enough to qualify for the additional assistance.
Obama said that price declines in homes and high unemployment in these regions have created major challenges for families.
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He argued that too many lenders were too focused on "making a quick buck than acting responsible," that "too many borrowers acted irresponsibly by taking on mortgages they couldn't afford" and government regulators "turned a blind eye to the problem."
State and local housing- finance agencies in states seeking assistance must submit program proposals to the Treasury Department, which will evaluate and decide if they qualify. The funds are allocated from capital set aside for housing from the $700 billion Troubled Asset Relief Program.
States where the average price for all homeowners in the state have fallen more than 20 percent from their peak are eligible to participate. The average price for all homeowners in Nevada, for example, has fallen by more than 40 percent from its peak.
Obama said three sorts of problems may be addressed with funding: unemployed borrowers, underwater borrowers and those with second mortgages on properties.
"This fund is going to help out-of-work homeowners avoid preventable foreclosures," he said. "It will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both borrowers and lenders alike."
Herb Allison, assistant secretary of the Treasury for Financial Stability, told reporters the allocations are a modest step to stem the housing crisis. However, he added that the program is intended to encourage these states to foster innovative approaches to limit further foreclosures.
"Local housing-finance agencies understand the local markets," he said. "While the housing crisis is national, it takes on local characteristics, and these groups understand the situation on the ground. We want to put to work their creativity and their knowledge to come up with new ideas to test those ideas in their communities."
Obama announced the program in Nevada, one of the hardest-hit states, along with Senate Majority Leader Harry Reid and other lawmakers.