President Obama unveils plan to tackle the US mortgage crisis
President Barack Obama has revealed a long-awaited plan to tackle the US housing crisis, aiming to help up to nine million families.
The plan will provide refinancing to four to five million "responsible homeowners" on the verge of defaulting.
A $75bn (£53bn) fund will also aim to help reduce monthly payments for a further three to four million people, to no more than 31% of their income.
President Obama unveiled the details in a speech at an Arizona high school.
He stressed that the plan focused on helping families who had "played by the rules" and would not help lenders or borrowers who had acted irresponsibly.
The announcement came one day after President Obama signed into law a $787bn (£548bn) economic stimulus package.
Help for homeowners
Falling house prices have been at the heart of the problems in the financial sector.
More than one million people in the US have lost their homes in the housing crisis, and President Obama said a further six million homes were at risk of foreclosure.
"All of us are paying a price for this home mortgage crisis," he said.
The plan is designed to assist "underwater" homeowners - those who owe more on their mortgages than their homes are now worth, as well as those on the verge of foreclosure.
President Obama said it could provide a buffer of up to $6,000 against declining values on the average home.
He also revealed a further $200bn in Treasury funding to mortgage giants Fannie Mae and Freddie Mac, which underwrite more than half of all US mortgages.
Fannie and Freddie would also have to change their policy on refinancing, he said.
Currently they will only refinance borrowers with mortgages up to 80% of the value of their home.
This plan abolishes that rule though, so that "underwater" homeowners could now refinance.
"By addressing the foreclosure crisis directly, the administration's housing plan finally begins to plug the holes that cause the problem," the Center for Responsible Lending said in a statement.
However, others were less optimistic.
"[The plan] seems to offer little help to borrowers whose loan exceeds their property value by more than 5%," said John Courson, chief executive of the Mortgage Bankers Association.
US markets closed flat as investors greeted the plan with caution.
Earlier, official data showed the rate of construction of new homes in the US fell to a 50-year low.