Today the Obama administration unveils its plan to help struggling homeowners with cuts in monthly payments, more possibilities for refinancing, and changed bankruptcy rules. Its central plank is a $50 billion subsidy for mortgage companies to make home loans more affordable. As the Wall Street Journal reports, economists are largely agreed that ending the foreclosure spiral and buoying house prices is key to ending the crisis.
The variety of techniques fills in some of the gaps in last week's announcement by Tim Geithner of a $700 billion bailout for the financial system, which the treasury secretary said would include housing provisions. One problem facing any mortgage rescue has been how to discourage Americans from simply halting payments in order to qualify for lower rates. Obama's plan may therefore force homeowners to pay back the difference between the original payment and the reduced figure.