Homeowners reliant on Obama housing plan

February 17, 2009 12:10:03 AM PST
Juan Rico is behind on his mortgage payments -- the 54-year-old from Hayward is on the brink of losing his home.

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"It was only me working, my wife was laid off and we have five kids also so it's hard," Rico said.

But the president's soon-to-be unveiled housing plan is designed to help people like Rico. Mr. Obama is expected to propose anywhere from $50 to $100 billion to help stem the tide of home foreclosures.

There are three major components to the plan -- to require lenders to write down mortgage principal rather than interest rates, to allow bankruptcy judges to modify mortgages and to lower most homeowners' mortgages to 31 percent of their income.

Haas School of Business professor Tom Davidoff says the concern for such a plan is obviously the cost and the fact that there is no guarantee it will work.

"A better solution would be to have financial institutions and certain borrowers absorb the losses and it's not just financial institutions, it's bond holders some of whom are overseas, some of whom are here and it's not necessary to have the U.S. taxpayer take on that entire burden," Davidoff said.

But for Rico, the president's plan may be his only hope, and he's counting on it.

"If that's the package that Obama is asking to help us stay home, why not," Rico said.

The president will unveil his housing plan on Wednesday in Phoenix, Ground Zero of the mortgage crisis. In Arizona last month, one in 182 homes faced foreclosure.

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