President Obama's Homeowner Affordability and Stability Plan gets the government and the economy of the United States over one crucial hurdle. It abandons the Bush administration's troublesome approach of helping banks in the hope that the banks would turn around and help people.
Instead, Obama rightly seeks to help people, with the understanding that millions of financially secure households are the rock upon which we will build a revitalized national economy.
There are many different breeds of troubled homeowners today. The Obama plan, so far, focuses on two of them.
One is the cohort of people who are making their mortgage payments on time but who are stuck in an economically untenable position because the home they are paying for is now, due to a nationwide collapse in home values that was no fault of theirs, worth much less than they owe.
The other is the group of families that, due to a combination of factors that might include a job loss and the upward shock of their variable-rate mortgages, are in danger of foreclosure.
Many of the homebuyers who will be assisted cannot strictly be called blameless. Often, they signed onto mortgages that they should have known would become unaffordable when rates were adjusted upward, or when the seemingly endless growth in housing values turned out not to be endless after all.
Still, a rash of foreclosures among these or any other groups of homeowners would not only hurt the homeowners. It would undermine the home values in whole neighborhoods, even cities. It would rob already cash-strapped cities and school districts of needed property tax revenue. And it would leave banks, many of which deserve no sympathy, holding the bag for so many bad loans that they won't be in a position to make any good ones.
Even the details that have been announced already are pretty complicated. And all of the regulations and procedures won't come out until March 4. Basically, though, Obama's idea is to help as many as 9 million American households refinance troubled mortgages at today's lower interest rates, rates that aren't reachable in the private market by people who are in arrears or under water.
The also-troubled mortgage buyers at Fannie Mae and Freddie Mac would be a party to many of the restructured loans. And there will be encouraging federal refresher payments offered both to homeowners and to lenders when mortgages are restructured and when they are paid on time over the next five years. It will cost upward of $75 billion, with the money coming, at least at first, from what remains of last year's bank bailout fund.
So far, the administration offers no lifeline to homebuyers whose property values have fallen drastically, as they have in such real estate boom-bust targets as California, Nevada and Arizona.
That remedy will be harder to come by. But it wasn't going to come at all without last week's beginning.
The home mortgage rescue plan would have been a lot more reassuring if it had come out about 2 million foreclosures ago. And the up to 9 million households it hopes to save from financial disaster may be less than half of those that were in danger of losing the keys to their domicile and largest investment. But in terms of addressing directly the problem that triggered the financial meltdown, it's a start.