New Housing Rescue Plan?

On Friday the government announced a new program, this one aimed at preventing foreclosures. Its aim is to keep more people in their homes, another way of tackling the troubling level of unsold homes that keeps the real estate market depressed.
Roughly 30% of home-owners with mortgages are ‘upside down.’ That is, they owe more on their mortgages than their homes are now worth, and home values continue to decline. Meanwhile, not only have foreclosures continued to rise even as the economy recovers, but there is a large backlog of pending foreclosures in the pipeline, backed up due to the paperwork logjam at banks.
The new plan would allow lenders to provide ‘qualified’ home-owners who owe more on their mortgages than their homes are worth, and who are in default on their mortgage, with a new loan insured by the Federal Housing Authority, removing the lender’s risk. However, the lender would have to take certain upfront losses, like cutting the principle amount owed on the mortgage to compensate for the decline in home values. The ‘rescue’ will not be available for home-owners who are upside down on their home values but are still making their payments.
The new program will also provide assistance to home-owners who are unemployed, in the form of having their monthly mortgage payments cut to just 31% of their monthly unemployment benefits for a period of three to six months.
For more than a year the government has been putting pressure on lenders to modify upside down and defaulting mortgages to help home-owners remain in their homes. Banks have been reluctant to respond, but yet there have been enough mortgages modified to give a pretty clear picture that it is not a long-term cure, only a short-term band-aid. Although involving only ‘qualified’ borrowers the banks believed could successfully make the lower modified payments, more than 40% of such modified mortgages, on which monthly payments were cut more than 20%, were back in default within 12 months.
And three to six months of assistance to unemployed home-owners is not a program with long-range chances of success, given the length of time that workers are remaining unemployed, unable to find new jobs after being unemployed for a year or two.
The rebate program is due to expire April 30, and the government has announced it will stop its purchases of mortgage-backed securities this month.
Can anyone see a lighter side here?