Is More Help for Home Buyers on the Way?

As first-time home buyers scramble to take advantage of the housing credit that expires Nov. 30, Congress today discussed options to extend the tax credit and offer it to a wider range of Americans.

Eight months after the administration introduced its plan to help spur the weak housing market, home sales have jumped. First-time buyer home sales are up 25 percent from last year and now account for 50 percent of all sales, according to the National Association of Realtors. Existing home sales rose for four months in a row for the first time in five years, thanks to the government incentive and relatively low mortgage rates.

VIDEO: The White House unveils a new plan to help those with mortgage problems.Play

But more help is needed, many homeowners say.

Leslee Ramos purchased a three-bedroom townhouse in Malibu Bay, Fla., three years ago for $255,000. Since then, her property's value has sunk to $121,000 and Ramos, who lost her job in 2007, is afraid she will go into foreclosure.

"I'm not very optimistic," Ramos said. "I've tried everything but in the past there've been all these programs, but nothing's helped. Right now, I'm so far behind I'm worried the bank is going to foreclose on my property."

VIDEO: Liz Ann Sonders and Dave Ramsey analyze real estate, stock and job markets. Play

Ramos has since found employment but her struggles caused her to fall behind in her mortgage payments, which makes getting credit a real problem.

She won't be helped by the Obama administration's new plan, announced Monday, to help state agencies provide new mortgages to jumpstart the housing market for low to moderate income first-time home buyers.

Freddie Mac and Fannie Mae will provide credit lines, backstopped by the federal government, with the aim to provide loans at lower rates than other banks. No price tag was given for the program, although the Treasury Department said it would help "hundreds of thousands" of homebuyers.

"There are many communities that are suffering because they have a large number of vacant properties," said Susan Dewey, president of the National Council of State Housing Agencies, which worked with the administration on the program. "This plan will really help states get first-time homebuyers in the right way, the old fashioned way. ... And we'll make sure that they're there for the long run."

But the program has its fair share of skeptics.

"State and local housing finance administrations provide a lot of assistance where it's needed but we shouldn't be fooled into thinking this will help hundreds of thousands of people very quickly," said Peter Morici, a professor at the University of Maryland who specializes in economic policy. "It's more like tens of thousands and slowly."

Senators Mull Tax Credit

The Senate Banking Committee held a hearing today to discuss the housing market and tax credit. Committee Chairman Sen. Chris Dodd, D-Conn., and Sen. Johnny Isakson, R-Ga., support extending and expanding the federal tax credit.

Under the current program, which expires Nov. 30, first-time home buyers can reduce their federal income tax by up to 10 percent of the purchase price for a maximum of $8,000. Dodd and Isakson want to expand the program and increase the income cap to $300,000 and extend the tax credit until June 30, 2010.

"I believe this [the extension] will provide the stabilization necessary for home values to begin to return," Isakson said at the committee hearing today. "Most importantly, it will thaw the current freeze in the move-up market, which must recover if we are to return to a viable market."

But there is concern about fraud. The Internal Revenue Service is investigating more than 10,000 suspicious claims, including 167 "criminal schemes," from the 1 million claims that have been filed, the Wall Street Journal first reported today. The House Ways and Means Committee will hold a hearing on the issue Thursday.

Additionally, lawmakers are divided over whether to increase the income threshold. Lawmakers want to expand the bill to not just first-time home buyers but to everyone, but that would mean higher costs for the program that is funded by the $787 billion stimulus package. The Joint Committee on Taxation estimates the extension would cost $16.7 billion over five years.

Today, secretary of the U.S. Department of Housing and Urban Development (HUD) Shaun Donovan told senators that costs are a bigger issue than the question of whether the tax credit is inflating the market.

"The tax credit has provided real tangible benefits to the market," Donovan told the commitee. "It is a question of understanding more fully the costs to the taxpayer of those benefits and whether the -- the credit should be extended based on those costs and -- and shaping the exact form of it."

Some proponents say the costs will be offset by the economic growth that a robust housing market will create.

"The $10 billion price tag is rather modest compared to the $700 billion in TARP (Troubled Asset Relief Program) funding and $800 billion of the broader economic stimulus package that was passed early in the year," Ron Phipps, vice president of the National Association of Realtors, told senators today. "If all of the economic dynamic responses are taken into consideration, the home buyer tax credit can be argued as a net-positive revenue generator for the federal government."

While analysts expect the housing market to continue to strengthen, they are divided on how it will impact the economy.

"Real estate will lead the way up but we're not going to bounce back out of this," personal finance expert and radio personality Dave Ramsey told "Good Morning America" today. "We're going to move slowly."

But Liz Ann Sonders, chief investment strategist for Charles Schwab, said all signs point to a quick bounce-back in the real estate sector.

"I think we're going to get that coiled spring, that spring-back has the potential to being sharper than we think," she told "GMA."

Recession or Depression?

Sonders said the administration needs to be careful about making sure the programs they are putting in place provide stability for the long term.

"It's an extraordinarily difficult job and there's only so much that can and should be done," she said. "We have to be careful about not establishing the same conditions again or a problem down the road."

On the housing front, the administration has yet to take a position on extending the tax credit for home buyers, Donovan said.

"We believe that within a few weeks we will have sufficient data to be able to sit down and -- and get to a -- a conclusion on this," he told lawmakers today. "[We] would like to do that very quickly."

But the administration is moving ahead with plans to extend funds to small businesses in the hopes of boosting the private sector. A White House official told ABC News that the Obama administration this week is likely to announce an initiative to increase credit available to small business. The proposal will focus on increasing the caps for existing loans provided by the Small Business Association (SBA) and providing access to TARP funds for smaller banks with problem loans on their books.

While there are signs in the economy that point to a positive shift -- the housing market is expanding, the Dow hit 10,000, banks are reporting hefty profits -- concerns remain, particularly about unemployment, which continues to rise. And those concerns are evident in polls.

Fewer people -- 50 percent -- approve of President Barack Obama's handling of the economy, according to the latest ABC News/Washington Post poll. This is the first time approval of the president's economic policies has slipped beneath the majority.

Vice President Joe Biden struck a cautious tone Monday, recalling an old adage that when a guy across town is out of work, it's an economic slowdown, when a person's brother is in that situation, it's a recession, and when it's the person himself, or herself, it's a depression.

"It's a depression, it's a depression for millions of Americans, through no fault of their own," Biden said Monday.

The rhetoric is different from what the vice president has employed before. Two weeks ago, Biden called the state of the economy "the great recession." And, last month, he praised the stimulus package, saying, "In my wildest dreams, I never thought it would work this well."

Many people warn that employment will be last to pick up, even if there are positive signs, and that may limit the effectiveness of the administration's housing programs.

More information on the administration's loan programs is available at the National Council of State Housing Agencies' Web site: