Obama moved to counter Republican criticism that the proposal would use taxpayer money to bail out irresponsible borrowers by stressing that only homeowners current on their payments could benefit. The president had sketched out the plan in his State of the Union address last week.
Home values have dropped 33 percent from their 2006 peak and nearly 11 million Americans now owe more than their homes are worth. Millions more have lost their homes in states that are up for grab in November's presidential election.
The White House is seeking to contrast Obama's stance with that of Republican presidential front-runner Mitt Romney, who has said foreclosures should be allowed to run their course.
"The truth is, it will take more time than any of us would like for the housing market to recover from this crisis," Obama said at a community center in Falls Church, Virginia. "But there are actions we can take, right now, to provide some relief to folks who've been making their payments on time."
The $5 billion to $10 billion program, that would be funded by a tax on the nation's largest banks, would allow homeowners to refinance at record low borrowing costs through government-backed loans. A senior administration official said it could reach 3.5 million Americans whose loans are not government-guaranteed. An additional 11 million homeowners whose loans are backed by Fannie Mae and Freddie Mac could also be eligible, the official said.
The Federal Housing Administration would run the program -- another sticking point for Republicans, who are worried about the agency's solvency. The FHA has been hard hit by mortgage defaults, and Republican lawmakers have warned it could eventually need a taxpayer bailout.
Republicans also have rejected Obama's call to pay for the program with a bank tax that Congress has turned down twice before.
"Rather than increase the government's stranglehold on our nation's housing finance system, we need to dial it back," said Republican Representative Scott Garrett of New Jersey.
RAMPING UP HOUSING RELIEF EFFORTS
Obama's plan would allow borrowers to refinance even if they owe far more than their homes are worth. Many homeowners have not been able take advantage of current record-low mortgage rates because the value of their homes has fallen and lending standards have tightened.
The White House said the program could save borrowers an average of $3,000 a year. It would be open to homeowners who have been current on their payments for the last six months and who have not missed more than one payment in the prior six months.
Applicants would need to occupy their home and have a credit score of 580 or higher to be eligible for the program. Only loans that fall beneath the FHA lending cap, which reaches as high as $729,750 in some high-cost markets, would be eligible.
"Government certainly can't fix the entire problem on its own. But it is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom," Obama said.
The administration also said it intends to ask Congress to broaden a separate refinance program that seeks to help underwater borrowers with loans backed by Fannie Mae and Freddie Mac win new loan terms. It said the regulator that oversees the two government-controlled mortgage firms - the Federal Housing Finance Agency - had not done enough to make the program accessible.
Together, Fannie Mae, Freddie Mac and the FHA own or guarantee nine out of 10 new U.S. home loans.
In addition, the administration called for a single set of federal standards for the mortgage servicing industry that would include simpler loan forms and greater efforts to assist borrowers facing foreclosure. An effort by the Consumer Financial Protection Bureau is already underway to streamline mortgage paperwork.
Obama also highlighted an effort the administration has undertaken with FHFA to convert foreclosed properties held by the two firms into rental units.
FHFA said on Wednesday that investors could now sign up to prequalify to bid on properties under the program, and said it would kick off a pilot phase soon.
Last week the administration called on FHFA to allow Fannie Mae and Freddie Mac to reduce loan principal for struggling homeowners, an effort to widen the reach of its main foreclosure prevention program -- the Home Affordable Modification Program
When it launched the program in 2009, the administration said it would help as many as 4 million Americans. So far, only about 900,000 households have won permanent mortgage relief under the program.
"I'll be honest - it didn't work at the scale we'd hoped," said Obama.
(Additional reporting by Laura MacInnis and Alister Bull; Editing by Tim Ahmann; Andrea Evans; Diane Craft)
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