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President Obama today pledged to help approximately 9 million homeowners facing foreclosure or struggling to pay their existing mortgages. His plan targets 2 groups of owners who have been impacted by the mortgage crisis. The first group are those who have seen their home values drop, but are not currently facing foreclosure but are struggling to stay afloat. This group would be able to refinance their mortgage for a lower rate. The other group who are facing foreclosure or pre-foreclosure mostly in part to "bad mortgages" such as adjustable rate, subprime & exotic loans would be able to have their loans modified to a lower interest rate for at least 5 years. This housing plan has a $75 billion price tag but experts predict it could exceed this amount. Obama was quoted saying, "By making these investments in foreclosure prevention today, we will save ourselves the costs of foreclosure tomorrow - costs borne not just by families with troubled loans, but by their neighbors and communities and by our economy as a whole. Given the magnitude of these costs, it is a price well worth paying".

Obama's plan to help "responsible homeowners" will allow 4-5 million families who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to be able to refinance through these government institutions. The plan could save these home owners hundreds of dollars a month by refinancing to a lower percentage rate. The government will use $100 million in treasury funds to increase the size of their portfolios from $850 billion to $900 billion so companies can loan that money out and lower interest rates. It is unclear whether homeowners who now owe more money than their homes are worth will qualify for such refinancing and what standards would apply for who qualifies for new loans. The Treasury Department plans to develop guidelines for loan modifications. Expect some specifics in about 2 weeks. I believe the target date to be March 4th.

On Good Morning America today, FDIC Chairwoman Sheila C. Blair discussed the formula she developed to help bail out IndyMac, is to get monthly mortgage payments down to 38% of the borrower's gross pay. This step is in the hands of the banks & mortgage companies. Without assistance from the federal government during this part, banks and investors will have to take a loss as the borrower's monthly mortgage payments shrink. Once the 38% threshold is reached, government aid kicks in. The bank and government will share the cost of getting that loan down to a 31% debt-to-income ratio and that rate must stay in effect for at least five years. Loan servicers get a $1,000 upfront fee for modifications that meet the requirements of the program and an additional $1,000 success fee for each year a borrower stays current for up to three years. This plan is targeted solely to helping homeowners who commit to making their payments and stay in their home. It is not aid for speculators or house flippers.

"In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen -- a crisis which is unraveling homeownership, the middle class and the American Dream itself," the president said.

**Source - ABC News reporters Jake Tapper & Matthew Jaffe