Millions could get help, but is foreclosure plan fair?
— -- The Obama administration's $75 billion housing rescue plan promises to help millions of financially struggling homeowners keep their homes, but it may be too little and too late for millions of others.
More than 3 million owners have lost their homes during the past three years, and almost 5 million more could follow this year through 2011, according to Moody's Economy.com.
Obama's plan calls for measures that will allow up to 9 million homeowners to reduce their mortgage payments through government-backed refinancing arrangements. Just how that will work isn't clear. The administration said that on March 4 it will provide more details on the plan and when it will go into effect.
Until then, homeowners in trouble — many of whom have adjustable-rate loans with rising payments and little chance of refinancing because of falling property values — are being urged to check with their lenders to see whether they might benefit.
The Obama plan reaches out to those at risk of default, rather than just those already facing foreclosure, and it offers mortgage servicers — the firms that collect payments — financial incentives to modify loans. In addition, the Treasury Department said Wednesday it will commit up to $200 billion more to mortgage giants Fannie Mae and Freddie Mac to try to keep mortgage rates low. It pledged $200 billion — $100 billion apiece — to them last fall when the government took them over.
Many heralded the plan Wednesday but also raised questions about how successful it will be. On Capitol Hill, some Republicans — amplifying criticisms by homeowners who didn't buy more expensive houses than they could afford and have paid their mortgages on time — challenged the fairness of an expensive bailout.
House Republican Leader John Boehner, R-Ohio, and Republican Whip Eric Cantor, R-Va., sent the president a letter asking, "What will your plan do for the over 90% of homeowners who are playing and paying by the rules?"
Economists had a more measured reaction. "This is a nice mix of policy steps that will have a mitigating impact on foreclosures," says Mark Zandi of Moody's Economy.com. "It won't stem foreclosures, but it will mitigate the increase."
Establishing a standard loan-modification process that applies to most mortgage servicers will help spur refinancing and modifications while providing legal coverage to ward off lawsuits by investors, Zandi says.
Related Stories
ABC News Live