President Barack Obama said homeowners facing foreclosure would have a second chance under a measure he signed into law on Wednesday, but he added consumers still must live within their means.
The law encourages banks to spare homeowners from foreclosure and cracks down on lenders who take advantage of them. The bill passed Congress earlier this week and Obama bypassed a promised five-day waiting period to make it law.
"There are Americans desperate to find a job or unable to make ends meet, despite work in multiple jobs, Americans who pay their bills on time but can't keep their heads above water," Obama said in the White House's East Room.
"Americans living in fear that they're one illness or one accident away from losing their home, hardworking Americans who did all the right things, met all of their responsibilities, yet still find the American dream slipping out of reach."
The law — officially called the Helping Families Save Their Homes Act — expands an existing $300 billion program that encourages lenders to adjust a mortgage if the homeowner agrees to pay an insurance premium. The program, set to expire in 2011, would swap out a homeowner's high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration.
Because of strict eligibility requirements, only about 50 homeowners are refinancing through the program compared to the 400,000 people it was estimated to help.
"Too many administrative and technical hurdles made it very difficult to navigate, and most borrowers didn't even bother to try," Obama said. "And this bill removes those hurdles, getting folks into sustainable and affordable mortgages and, more importantly, keeping them in their homes."
The lending industry helped scuttle a tougher measure that would have forced lenders to reduce the monthly payments of owners in bankruptcy.
Obama also blamed greed among lenders and irresponsibility among borrowers for part of the financial crisis that has led to 1.3 million jobs lost since February.
"Now, much of what caused this crisis was an era of recklessness, where short-term gains were too often prized over long-term prosperity," Obama said. "And too often in our nation's capital, we said the right words, we patted ourselves on the back, but ultimately failed to do what we were actually sent here to do — and that is to stand up to the special interests and stand up for the American people."
The bill also extends through 2013 an increase in deposit insurance by the FDIC from $100,000 to $250,000.