The question remains will it help? And what does it mean for those who pay their mortgages? Or is this bailout to "prevent foreclosures" just fantasy land?

"The lending plan, a full $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the ever-worsening U.S. recession.  Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" -- those in which homes' market values have sunk below the amount the owners still owe."

But what they don't seem to realize - is that investors in complex mortgage-linked securities, who make money based on interest payments, could still balk, including those who hold second mortgages or home equity loans. Their approval would be needed to prevent many foreclosures. They will likely initiate foreclosure (as long as they think they can get some money out of the deal) even though say - a first mortgage holder (a Fannie or Freddy) - may not.  So - the homeowner will end up getting foreclosed upon anyway.  Never mind that more time for a short sale might have benefited them in a better way...

The plan offers no help to borrowers whose loan exceeds their property value by more than 5 percent.   (And that is a LOT of borrowers!)  You aren't eligible if your loan balance is more than 105% of your property value.....  Yet they article goes on to say...

Addendum -- Thur Feb 19 -- Suze Orman said this morning that it only applies to conforming loans - not jumbo's.  Also - you have to have GOOD CREDIT to be able to take advantage of it.  Hmmm - Ok - you are trying to help people that are headed for foreclosure that haven't made their payments - but that have to have GOOD CREDIT in order to use this program?  I'm speechless....  She also said that the payment then resets back to what it was in 5 years....

The press release yesterday stated:

"In theory, (note the "in theory")  homeowners facing foreclosure or borrowers owing more on their homes than their mortgages are worth would have more opportunities to refinance their loans so that they have lower monthly payments. Lenders would voluntarily participate in the government programs." "Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 million to 5 million families do just that -- if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac." Now - is this contradictory or what?  Perhaps they should have said - borrowers owing 1-4% more on their homes than their mortages are worth - but not 5% or above....

This shows you how screwed up these government programs are....

Obama said, "it will do nothing to help "the unscrupulous or irresponsible."   Now - who determines who that is??

"He cited so-called speculators who took out risky loans on multiple properties to make money by selling them during the housing boom, lenders who took advantage of naive buyers by glossing over the fine print, and people who willingly bought homes that were way beyond their means." 

Now - who is to determine whether someone bought a home beyond their means? 

Does that mean the guy who's salary or income was cut (say a salesperson who's sales are down due to the economy) or who lost his job bought a home beyond his means?   So this doesn't apply to buyers who had unscrupulous lenders?   Obama's comments make absolutely no sense.

But he did get one thing right - he said "This plan will not save every home."  In fact - I don't think it will "save" a single home... It is just one big boondoggle.

Obama said his plan was aimed at "rescuing families who have played by the rules and acted responsibly."  

Who is to determine "who played by the rules" -- or which person "acted responsibly"?    Do you see the absurdity of that statement?

So - the person who has paid their mortgage for three solid years since buying - but who's income was recently reduced due to the economy and can't make their payments anymore - didn't act responsibly?   At the time - they thought they were being very responsible.  But the economic rug got pulled out from under them.  The homeowner was supposed to be a fortune teller and predict the future?

Who is to determine who acted "responsibly" and who didn't? 

They define a "Responsible Homeowner" as a person who's mortgage is owned or guaranteed by Fannie Mae or Freddie Mac and their mortgage is not more than 105% of the current value of your home.  Then - they can apply to refinance and lock in a lower interest rate. 

So - apparently - if someone put 20% down - but the value of their home dropped 26% since they purchased -- then they are not a "responsible homeowner."  Do you see the absurdity of this?

The goal is to lower many endangered homeowners' payments to no more than 31 percent of their income.  Now - what if they have no income because they lost their job?

  Does that mean that their payment will go to zero?  I don't think so. 

They won't be able to get the re-fi. 

What if their income is now working at Starbucks?  Since they still have income - does that mean their McMansion's payment will now be 31% of their Starbucks takehome pay?   I hope you see my point here....the absurdity of this... At what level of income is a sufficient income in order to qualify to get the rate or principal reduction?

Of the nearly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody's Economy.com

But that depends on a high degree of cooperation by lenders who have been increasingly wary of new lending as the crisis has deepened.

It seems the plan will only assist certain people and leave out others like families in danger of losing their homes because of job loss. Such families will not be able to qualify because they wont earn enough income to pay even lower mortgage payments.

For those that do qualify here's how it would work. For a $250,000 mortgage at 7.5% interest, the borrower is currently making a payment of $1,750 per month. If the rate is brought down to 5%, the new payment would be $1,350 per month -- a savings of $400 per month. The cost to the federal government, (the tax payer)  assuming a 50% match by the servicer: $200. For $1 million, the federal government could reduce the rate for 50,000 borrowers. By comparison, the same $1 million might purchase a handful of mortgages, or guarantee a few hundred.

Other remedies in the plan could include incentives for lenders and investors to reduce the principal on a mortgage though homeowners could be required to repay the reduction or interest rate subsidies at the end of the term of the loan or when they sell their home. In theory, the back-end payments would be covered by a rise in the homes value over time.

The question remains just who would qualify for this service and would it really make a difference?  Nearly half of all struggling homeowners who have already received mortgage modifications from their lenders have fallen back into the foreclosure process.

Would it not make more sense to use this type of money to allow lower interest loans to everyone?  Of course it would.  Prices (and demand) are inversely related to rates.  Yet - rates have been creeping up recently.  Does anyone in Washington have a clue?  Will they ever get one?  I was thinking that even if they had engineered rates to drop to 4.5% - it wouldn't be enough - and here we are - approaching mid-5's...  Helloooooo?  Does anyone have a brain in DC?

 Maybe it's just me but it seems the congress is using spoons to bail a sinking ship. Our industry needs some REAL incentives to get people to buy.

The Foreclosure fiasco is just that, a failure that was created by congress in 1977, Called the Community Reinvestment Act. The bill was  intended to help first time home buyers.  What it did after riskier, unwise amendments and regulatory rulings were added to the bill in the Clinton era, was create subprime mortgages that put people in homes that could not afford them.   Today, congress is just adding fuel to the fire. And it is our industry that will suffer.

A total of 8.1 million U.S. homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse.