Some Homeowners Upset Over Presidents Housing Rescue Plan

02.19.09 | FL News Team

President Obama says his new mortgage rescue plan will help those who obeyed the law and followed the rules. But many Americans who did follow the rules are upset because they not only won't be able to apply for a piece of the financial pie but will have to foot the bill for those who do.

Some people think they're being punished over and over, first by subsidizing banks that issued risky loans, again by the value of homes being depressed by foreclosures and now a third time by subsidizing borrowers who purchased more home than they should have. 

The President announced his program Wednesday in Arizona. It will let homeowners with little or even negative equity refinance their homes as long as their mortgages are backed by Fannie Mae or Freddie Mac.

It also provides for renegotiation of troubled mortgages so payments amount to no more than 31-percent of household income. "The Wall Street Journal" says the plan essentially shuts out borrowers who own homes too expensive to be covered by Fannie Mae or Freddie Mac.

That includes millions of people in high priced markets like California. Now many homes in high priced areas are worth half what their original mortgages were made out for. The paper cites the example of one person who has watched the value of her central California home fall from 605-thousand dollars four years ago to about 350-thousand-dollars today.

With a 125-percent loan-to-value ratio that homeowner won't be able to take part in the Obama program.  The homeowner makes this disturbing statement. She is considering just walking away from the home saying, quote, "years ago you would have thought it was immoral."