President Obama on Wednesday will announce a broad plan to modify problem mortgages that helps those with subprime loans and those whose loans are more than their home is worth -- but he said it must also usher in a new era of responsibility for borrowers.
His plan would allow Fannie Mae and Freddie Mac, the two government-backed loan agencies, to refinance homeowners with "underwater" mortgages, and he said the government will push lenders to renegotiate subprime loans to terms borrowers can handle.
Blaming "the erosion of our common values," Mr. Obama pointed a finger at banks who pursued profits too blindly, lenders who took advantage of home buyers, borrowers who sought loans too big for their means and politicians who failed to stop the cycle.
The president, in remarks he plans to give in Phoenix on Wednesday, will say borrowers will have to step up their responsibility, for example bearing extra costs and having to make payments on time to get help with subprime loans.
"Government must take responsibility for setting rules of the road that are fair and fairly enforced. Banks and lenders must be held accountable for ending the practices that got us into this crisis in the first place. Individuals must take responsibility for their own actions," Mr. Obama will say. "And all of us must learn to live within our means again."
Mr. Obama chose Phoenix because it is among the hardest-hit communities in the housing bust.
The long-awaited plan is part of Mr. Obama's effort to set the economy back on track. On Tuesday the president signed a $787 billion spending and tax-cuts bill he said will create 3.5 million jobs over the next two years, which is the centerpiece of his efforts so far.
Still to come is an effort to rewrite the rules for financial institutions and to buy up bad assets so the financial sector can regain its footing.
House Republican leaders sent a letter to Mr. Obama on Wednesday morning telling him that though only three Republicans -- all senators -- supported the $787 billion spending bill, their party still wants to cooperate with the president.
They sent a list of six questions they said they needed to know answers to, including whether borrowers who misrepresented their income or assets will be eligible for government assistance under the plan.
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