While Maryland and other states continue to struggle with the effects of a rising tide of mortgage foreclosures, President Barack Obama has come up with a new $75 billion plan that could help keep as many as 9 million deserving families in their homes. It's long-awaited relief, but for many others, there will be no rescue.
Under Mr. Obama's program, lenders will be given incentives to renegotiate loans and government subsidies to reduce monthly payments to help homeowners on the brink of default. Fannie Mae and Freddie Mac will be able to offer refinancing without requiring the 20 percent equity that many homeowners no longer have because of plunging property values. The president promises angry mortgage payers that irresponsible home buyers won't get help and says he will fight for bankruptcy reform legislation that would allow judges to reduce mortgage debt for borrowers who cannot make payments for reasons beyond their control.
All of this is promising, but it will fall far short of producing a new housing boom, and urban neighborhoods blighted by foreclosed homes may continue to languish. The president's economic stimulus plan offers more direct financial aid for cities to help them buy and resell foreclosed properties.
In Baltimore, more than homeowners have felt the sting of the foreclosure crisis. The Patterson Park Community Development Corp., a nonprofit widely praised for helping increase homeownership and reversing years of blight in the southeast Baltimore neighborhood, filed for bankruptcy court protection last week after defaulting on more than $900,000 in mortgage payments. The organization had been trying to sell about 125 properties, ranging from vacant lots to renovated homes, but was unable to do so because of debt tied to that real estate.
The activist housing organization ACORN cut the padlock on a foreclosed house in Patterson Park last week to help its former owner who it claimed was a victim of mortgage fraud.
Other hard-hit city neighborhoods should get relief through the Neighborhood Conservation Initiative, a federal program that seeks to attract qualified buyers to areas with high foreclosure rates. Of the nearly $27 million awarded to Maryland, Baltimore is expected to receive about $4.1 million for this effort in the spring. But the need is far greater - the state received $64 million in grant requests from 21 jurisdictions, more than twice the available funds.
The president's foreclosure plan depends on banks participating. Mr. Obama expects to lure bankers with financial rewards for cutting new deals with homeowners and the threat of mortgage reductions ordered by bankruptcy judges. But as the ranks of the unemployed grow, the number of Americans able to meet the credit requirements is expected to drop. And skeptics note that more than half of the previously renegotiated payment plans have gone into default again.
Perhaps the best we can hope for from Mr. Obama's program is a soft landing at the end of the real estate slump.