Shelby criticizes President's mortgage plan

Senator Richard Shelby
Senator Richard Shelby

President Obama unveiled his new mortgage plan Wednesday in Phoenix, hard hit by foreclosures, plummeting home values and unsold properties.

The President said the housing crisis is the main cause of the recession.

"If we act boldly and swiftly to arrest this downward spiral then every American will benefit," he told the crowd.

The Obama plan would pay lenders $75 billion in subsidies to reduce mortgage rates for families facing foreclosure, change the rules to allow Fannie Mae and Freddie Mac to re-finance "upside down" homes worth less than their mortgages, and pump up to $200 billion s into the system to make more mortgages available.

Nine million families could be helped.

The plan's designed to exclude speculators and owners who lied to banks about their incomes.

"It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans," President Obama said.  "And by bringing down the foreclosure rate, it will help to shore up housing prices for everybody."

One realtor likes the President's plan.

"I think just to put a positive spin in people's minds right now will help to turn this economy around," said Phoenix realtor Bob Hassett.

The top Republican on the Senate Banking Committee is outraged.

Richard Shelby of Alabama says the Obama plan would pay people to do what they should already do: Pay their mortgage.

"The President's plan appears to help those who least need it, and doesn't help those that do," Shelby said. "The Fannie/Freddie proposal allows underwater homeowners to refinance even if they are not at risk of default."

Shelby says that "will encourage lenders to help those who need help the least which will divert resources from families most immediately at risk of losing their home."

In addition to  Shelby's concerns about the bill paying people to pay their mortgages, he claims the bill, "also uses taxpayer money to pay banks to do what they should already be doing - modifying mortgages."

"This is nothing more than a lender bailout where the American taxpayer is once again being asked to foot the bill," he explained. "Once again, I believe our first priority must be to effectively address the problems in our banking system.  Once that is done, we will have built the foundation upon which an economic recovery can be built."