WASHINGTON — The housing plan unveiled by President Obama on Wednesday goes further than any previous effort to break the vicious cycle of declining home values, rising mortgage defaults and frozen credit that triggered the country's worst recession since the 1930s.
And it embraces strategies that attack the complex problems on several fronts but without requiring a long struggle in Congress.
Even so, there is doubt about whether the initiative will be bold enough and swift enough to succeed where other efforts have failed.
"It's a positive step in the right direction," said economist Mark Zandi of Moody's Economy.com. "I think it will be much more successful than those that preceded it. I worry that it's not going to be successful fast enough."
The plan has two main elements aimed at the twin problems feeding the foreclosure crisis that is claiming more than 6,000 homes a day: "underwater" mortgages on which the balance owed is more than the current value of the property, and unaffordable loan payments that are forcing homeowners into default.
Obama presented the plan in an appearance outside Phoenix and said it would help arrest the slide in the overall economy.
"All of us are paying a price for this home mortgage crisis," he said. "And all of us will pay an even steeper price if we allow this crisis to deepen."
One part would allow borrowers whose homes have lost value to refinance their mortgages at today's relatively low interest rates, even if the homeowner has little or no home equity left. To be eligible, borrowers must live in their homes and have a loan that is owned or guaranteed by Fannie Mae or Freddie Mac.
The opportunity to refinance will help "homeowners who have played by the rules [and] have been making their payments on time" but have been unable to refinance because collapsing housing prices have eroded the equity in their homes, said Housing Secretary Shaun Donovan.
The plight of those borrowers, Donovan added, "just isn't fair, and it's something that we will help to fix."
Because the refinancing program will lower payments for many middle-class families, it will directly benefit the overall economy, Treasury Secretary Timothy F. Geithner said.
"In that case, it acts like stimulus," he said.
The second part of the plan is a loan modification program designed to keep troubled homeowners out of foreclosure and to keep "at risk" borrowers from defaulting in the first place. It would accomplish that by offering new incentives to lenders and mortgage servicers to modify loans.
