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Homeowners receive aid in US$75b boost

UNITED States President Barack Obama promised US$75 billion more in government spending yesterday in a plan to pump money into the crashing housing sector and prevent millions of Americans from losing their homes.

The huge new infusion of federal money is designed to bring under control the mortgage foreclosure crisis amid the worst economic slump to hit the country since the Great Depression.

Obama's release of the new mortgage plan in the Phoenix, Arizona, is his second major attack on the symptoms of the US economic decline in as many days.

On Tuesday he was in Denver, Colorado, to sign a US$787 billion economic stimulus bill - a mix of government spending and tax cuts - designed to reverse the US economic malaise.

But fighting the larger economic downturn depends heavily on ending the crisis in housing, the sector that set the economy on its downward spiral last year and threatened the country's banking system with collapse.

The US$75 billion injection of government money is an effort to prevent up to 9 million Americans from losing their homes. The plan, which is more ambitious than expected, aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure.

The initiative is designed to help up to 5 million borrowers refinance, and provides incentive payments to mortgage lenders in an effort to help up to 4 million borrowers nearing foreclosure.

In tandem, the Treasury Department said it would double the size of its lifeline to Fannie Mae and Freddie Mac.

The government seized the mortgage finance companies last fall and said yesterday it would absorb up to US$200 billion in losses at each company.

Obama chose Arizona for the announcement because the state is one of the hardest hit by foreclosures.

"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," Obama said on Tuesday as he signed the US$787 billion stimulus package in Denver.

The biggest players in the mortgage industry already had halted foreclosures pending Obama's announcement.


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