The nation's housing crisis is damaging not only the U.S. economy, but also what it means to be middle class in America, President Obama said Wednesday, urging Congress to allow new federal loan guarantees for homeowners looking to refinance.
Saying that he is issuing administrative maneuvers for a "homeowners bill of rights" and other means to investigate and prevent abuses in the mortgage industry, Obama told an audience in Falls Church, Va., that he wants the Federal Housing Administration to guarantee refinancing for families who are current on their mortgages
"It is wrong for anybody to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom," Obama said in a subtle jab at Mitt Romney, who has suggested the market should be allowed to run its course.
Claiming that under his refinance plan, households could save up to $3,000 a year on their payments, Obama also offered a heavy dose of criticism for Congress and the banks that loan money for mortgages.
He said he wants a "homeowners bill of rights" that would be a single set of standards to make sure borrowers and lenders play by the same rules. Obama said the bill of rights would compliment the work approved by the Consumer Financial Protection Agency.
"Now that our new consumer watchdog financial agency is running at full steam, now that Richard Cordray is in as the director of the Consumer Finance Protection Bureau, they're moving forward on protections like this," he said.
He added that he also wanted to get foreclosures off the market by turning the properties into rental housing in order to stabilize sale prices in hurting neighborhoods, and he said that he would like to reduce the mortgage process to one form.
Republicans responded by saying the proposal sounds like more of the same failed policies.
"How many times have we done this? We've done this at least four times where there's some new government program to help homeowners that have trouble with their mortgages," said House Speaker John Boehner. "None of these programs have worked and I don't know why anyone would think this next idea is going to work, and all they've done is delay the clearing of the market."
Obama acknowledged that past administration proposals for housing programs have fallen short of their intended goals.
"I'll be honest, the programs we've put forward didn't work at the scale we'd hoped," Obama said. "Not as many people have taken advantage of it as we wanted."
The housing issue, while national in scope, resonates particularly in election battlegrounds like Nevada and Florida which have faced record foreclosures.
The administration proposal faces a major hurdle in Congress. The program would cost between $5 billion and $10 billion, depending on participation, and the administration proposes to pay for it with a fee on large banks. The administration has tried unsuccessfully before to win support for such a tax on large banks.
"No more red tape. No more runaround from the banks. And a small fee on the largest financial institutions will make sure that it doesn't add to our deficit," Obama said of his plan.
The proposal would expand the administration's Home Affordable Refinance Program, which allows borrowers with loans backed by government-affiliated mortgage giants Fannie Mae and Freddie Mac to refinance at lower rates.
About 1 million homeowners have used it, well short of the 4 million to 5 million the Obama administration had expected. Moreover, many "underwater" borrowers -- those who owe more than their homes are worth -- couldn't qualify.
The administration estimates that 3.5 million borrowers with privately-held mortgages have high enough interest rates that they would have incentive to refinance under the new plan. That's in addition to 11 million borrowers who have Fannie- or Freddie-guaranteed loans who could be eligible for refinancing under the administration's proposed changes.
The Associated Press contributed to this report.