Help Is on the Way? Obama Outlines Mortgage Plan

"People tried other approaches to help fix this problem and they are not working," Geithner said. "So what we tried to do is put together a more powerful package of incentives and other 'inducements,' I'll call them, to try to make sure you get a level of participation and a level of relief in mortgage payments that has not been achieved ... so this represents our best judgment of that, and you have to look at those costs against the very substantial benefits this will bring to homeowners across America and to the overall economy as a whole."

Other Steps

The administration also plans to go to Congress to allow bankruptcy judges to modify mortgages. Housing advocates have been pushing for this plan while lenders said this will increase risk to them and cause mortgage rates for all to increase.

Obama also will require participating banks and services to report on the modifications with regulators. He is also providing $1.5 billion in help for renters forced to move when their landlords go belly up and $2 billion in help to cities to clean up and maintain foreclosed properties.

Too Many Groups Fighting For Own Interests

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America, a nonprofit community advocacy and homeownership organization, has been an outspoken critic of the Obama administration for not doing enough, sooner.

"President Obama, when he was campaigning, said one of the first things he would do is put a moratorium on foreclosures," Marks said. "I agree you have to deal with jobs, because if you don't have a job, then you can't own a house. But while he's figuring that out, he could have been out there saying, 'No more foreclosures.' And he did not do that."

Marks said reducing people's mortgage payments is good, but warned that any mortgage modifications should be long-term. Otherwise, he said, "homeowners will make a rational decision to walk away."

The problem for Obama, Marks said, is that he has too many groups fighting for a plan that best serves their own interests. Marks fears that Obama's plan will only offer temporary relief and not provide a long-term solution.

Marks has been critical of Treasury Secretary Timothy Geithner, saying he is just like his predecessor, Henry Paulson, except "with hair." Marks likes to call him "Tiny Tim."

"It's small ideas for a huge problem," Marks said. "We've got a huge problem and he's got to step up to the problem."

Guy Cecala, publisher of Inside Mortgage Finance, said he doesn't think the foreclosure problem has even peaked.

"Given the fact of unemployment surging ahead, we're going to see a whole bunch more of foreclosures down the pike," Cecala said.

Cecala added that loan modifications are occurring, but not as fast as foreclosures are occurring.

"So, we really haven't addressed any fundamental problem with that," he said, "plus, we have the deteriorating economy, which should greatly pick up the number of people who have trouble paying their mortgage and lead toward foreclosures."

To date, he said, no concrete steps have been taken to reduce the number of foreclosures except to put a moratorium of a month or two on new ones.

"And if that's the case, all you're doing is postponing the inevitable," Cecala said. "Generally, if you've got a foreclosed property and you don't do anything about it during your moratorium, you're just going to foreclose on that property once the moratorium is over."

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