DaytonDailyNews.com

WASHINGTON — A day after he signed a $787 billion economic stimulus bill, President Barack Obama Wednesday, Feb. 18, began pushing the next leg in what he's called a "three-legged stool" aimed at fixing the nation's crumbling economy – a bill aimed at keeping as many as 9 million people from losing their homes.

This plan, with a price tag of $75 billion, would come from money approved in last year's massive $700 billion financial bailout. Most provisions in the plan wouldn't need congressional approval.

It's basically a three-part program: The $75 billion Homeowner Stability Initiative would create a set of incentives aimed at encouraging lenders to cut struggling homeowners' monthly mortgage payments to more affordable levels. Under this provision, "affordable" is considered no more than 31 percent of a homeowner's income.

Obama's plan also aims to help some of the nation's 12 million "underwater" homeowners – homeowners who owe more on their house than it is currently worth. In Ohio, some 420,000 people are considered "underwater" in their mortgages.

Obama's plan would make it easier for "underwater" homeowners who have mortgages through Fannie Mae or Freddie Mac to refinance. Between 4 and 5 million homeowners would qualify, according to Obama.

Finally, the Obama administration gave Fannie Mae and Freddie Mac $200 billion more in financial backing in hopes of ensuring that plenty of credit remains available for mortgages.

"The plan I'm announcing focuses on rescuing families who have played by the rules and acted responsibly," Obama said in a press conference unveiling the plan in Arizona, a state that has seen foreclosures skyrocket.

But Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio said lower interest rates may not help homeowners who owe more on their mortgage than their house is worth who don't have Fannie- or Freddie-backed loans. Those homeowners, he said might not be able to refinance because their home's value has plummeted.

Still, the proposal, he said, "is the strongest proposal we've ever seen from the feds."

Republicans were quick to pounce on the plan.

House Minority Leader John Boehner, R-West Chester, released a statement saying that "there are many unanswered questions" about the proposal.

"Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?" he asked.

Boehner also expressed concern about a provision Obama is pushing that would allow bankruptcy courts to modify mortgage payments for homeowners who owe more than their home is worth.

Bankruptcy judges are not currently allowed to modify loans on a primary residence, but can modify them on a second-home mortgage. Boehner said such a provision – which would need congressional approval – could increase mortgage payments for other borrowers.

As of January, 2009, Ohio was the 10th highest state in foreclosures, according to RealtyTrac, an online marketplace for foreclosure properties. RealtyTrac reported 274,399 U.S. properties somewhere in the foreclosure process during January, a 10 percent decrease from December 2008 but still up 18 percent from January 2008. In all, the site reported 11,199 properties in foreclosure in the state last month. Montgomery County, meanwhile, ranked 8th of all Ohio counties for foreclosures in January, according to RealtyTrac, and saw a 10 percent increase in foreclosures from December.

This isn't the federal government's first crack at the problem. Congress has periodically approved money aimed at helping counseling agencies that work to keep struggling homeowners out of foreclosure, and in 2008, Congress approved the "Hope for Homeowners" act which aimed to help homeowners swap riskier loans for 30-year fixed rate loans with lower rates. That program is widely perceived to be a failure.

The $300 billion program was expected to help 400,000 homeowners, but has received only 517 applications since its inception. Of those, 37 loans have been closed, but all await endorsement by the federal Department of Housing and Urban Development.

But the new $75 billion plan providing incentives for banks to modify mortgages will have a few more incentives, according to backers of the program. Those who receive money through the bank bailout, for example, will be compelled to participate in the program.

Andrew Jackabovicz of the Center for American Progress's Economic Mobility Program, said "Hope for Homeowners" didn't work because banks were unwilling to take the steep losses required from that program. In some cases, they would have marked loan values down significantly.

Obama's proposal, he said, might cost banks some money in interest but won't require banks to take it on the chin quite so much, he said.

"I think it's far more palatable," he said. "(Banks) recognize that the proceeding foreclosure would be more costly than making a modification."