By Dan Froomkin
12:55 PM ET, 02/19/2009
President Obama's financial rescue proposal is still very hypothetical. His stimulus package is almost too big to comprehend, and it has yet to bear fruit. But his promise yesterday to help as many as nine million struggling homeowners had a real solidity to it, creating the most concrete sense yet that help is on the way to the people at the heart of this economic crisis.
Starting two weeks from now, a series of governmental sticks and carrots will encourage lenders to modify loan terms for as many as four million homeowners currently facing the prospect of foreclosure. And as many as five million homeowners who have little or even negative equity in their homes will be able to refinance their loans at low interest rates.
Barbara Kiviat writes for Time: "How effective all that will be is an unanswered question. No plan can change the fundamental economics of a bubble deflating or an economy stalling — of overpriced homes returning to more-reasonable prices and out-of-work homeowners not having the income to make mortgage payments. What this plan does offer, though, is a series of targeted interventions designed to help specific groups of borrowers, and by doing that to hopefully limit the knock-on damage caused by foreclosures, both to neighborhoods and the overall economy. 'This will help some people who deserve to be helped,' says Joe Gyrouko, a professor of real estate and finance at the University of Pennsylvania's Wharton School. 'But will this stop the decline in housing prices? No.'"
Sheryl Gay Stolberg and Edmund L. Andrews write in the New York Times: "The plan, which was more ambitious and expensive than many housing analysts had expected, drew praise from consumer advocates as well as the financial industry....
"Except for the provision that empowers bankruptcy judges, almost all the other elements can be enacted by Mr. Obama without further action by Congress."
Jenifer B. McKim writes in the Boston Globe: "Housing advocates praised the plan as ambitious, with cash incentives to lenders and borrowers to help stop the bleeding that has left nearly 10 percent of US homeowners either in foreclosure or behind on their mortgages. The plan, which uses federal money that was previously authorized, incorporates many proposals suggested over the past six months as the housing crisis has worsened."
Nobody, of course, is suggesting that it is perfect.
Laura Meckler writes in the Wall Street Journal: "The plan drew praise for its use of incentives. But critics said it didn't do enough to address the difficulty of altering loans packaged into securities. It also will be harder for people to refinance their mortgages if they owe much more than the house is worth or the mortgages aren't owned or guaranteed by Fannie Mae or Freddie Mac. That would leave out many borrowers in hard-hit states such as Florida, California and Arizona...
"Some economists were hopeful the Obama plan would subsidize an interest-rate reduction for borrowers. Instead, it appears designed to aid homeowners who might lose their homes."
Michael D. Fletcher and Renae Merle write in The Washington Post that the package "drew criticism from some housing experts and consumer advocates, who argued that it does not go far enough in addressing some critical aspects of the foreclosure crisis....
"While broad, the package does not tackle some key issues, critics said, noting that it does not include a plan for dealing with second mortgages, which often become a stumbling block for mortgage-modification programs. Others pointed out that for many lenders, the program would be voluntary."
Will this turn into just the latest political football? Quite possibly.
Stephanie Armour writes for USA Today: "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?'"
Mike Madden writes for Salon that Democrats yesterday "noted pointedly that the Bush administration could have done the exact same thing under the authority Congress gave it during the financial crisis last fall, and didn't. 'This is light-years ahead of anything we saw coming out of the Bush administration,' said Andrew Jakabovics, a housing analyst at the Center for American Progress, a liberal think tank. Obama hit the same theme, a little less directly. 'Our housing crisis was born of eroding home values, but it was also [born] of the erosion of our common values,' he said. 'And in some cases, common sense.'"
The New York Times editorial board writes: "The anti-foreclosure plan announced by President Obama on Wednesday is a decisive break from the Bush administration’s disastrous protect-the-banks-but-not-the-homeowners policy. The president has promised that it will help as many as nine million American families refinance their mortgages or avoid foreclosure. That’s a good start, but given the dire state of the economy, we fear it still may not be enough."
The Washington Post editorial board writes: "Mr. Obama has negotiated the trade-offs cautiously. His plan offers more relief than previous programs, and targets it. Cutting some homeowners' borrowing costs could help them stay in their homes as long as they still have work. The plan pushes back against the recessionary tide. But that tide is still rising."
The Wall Street Journal editorial board writes that "by investing in failure, the Administration will...prolong the housing downturn and make financing a home purchase more difficult for future borrowers. Meanwhile, the plan isn't likely to slow the continuing decline in housing prices."