Last February 19 in the state of Arizona, President Barack Obama announced his $75 billion Homeowner Stability Initiative aimed at solving home foreclosures. This has surprised many as it was initially pegged at $50 billion only. The amount itself underscores the importance of housing problem in the current administration's agenda. This Wednesday, the details of the plan were unveiled and were met with mixed reactions. Basically it involves three strategies:



1. First is to remove restrictions on Fannie Mae and Freddie Mac that prohibit both institutions from refinancing mortgages they owned or have guaranteed when the value of the loan is more than what the house is worth. This two own or guarantee almost 31 million of home loans, that's more than half of all home mortgages.

2. Second, offer incentives to lenders who modify their subprime loans at risk of foreclosure, such that the rate becomes affordable to borrowers. Lenders can only modify mortgages on single-unit homes with maximum value of $729,750.This applies to borrowers who made their loans or January 1, 2009 and earlier. Lenders can offer interest rate to as low as 2 percent for five years and can rise to about 5 percent until the mortgage is paid. The payments should not be more than 31 percent of a borrower's income. The government will pick the tab on the difference between the old monthly payment and the new payment. The mortgage rates must also be kept low for people looking for new mortgages.

3. Finally the government must support any reforms or initiative to help avoid home foreclosures. The administration is willing to shell out $2 billion to any community that comes up with ideas on preventing foreclosures.

The Homeowner Stability Initiative aims to keep 9 million homeowners from losing their homes via foreclosure by offering mortgage refinancing at lower rates. But technically, it will benefit only borrowers that owned no more than 5 percent of their home's current value. A majority of the homeowners owe a lot more than this. For example, a homeowner owes $400,000 on a house now worth $300,000.

According to Zillow.com, "In the California cities of Stockton, Modesto and Merced, more than one out of every 10 homeowners with a mortgage won't qualify for any help because they owe more than 50 percent more than their house's current value". In Seattle, home prices are down by 13 percent compared to a year ago, while its 30 percent down in Las Vegas.

Government officials admit that the objective is not to save every home, but it's just a partial fix to a bigger problem of putting a stop to the worst recession in US. Many experts believe that the housing crisis will be worst in the next few months as housing values continue to drop. It is expected that another 2.16 million properties could be vulnerable to foreclosures if home prices fall by 5 percent.

The Homeowner Stability Initiative is necessary to help save the economy; since the housing crisis had been attributed to triggering the current recession. But whether the plan would work or not is not what most are worrying about. It's more on whether they can qualify for the initiative or not.