Is the relief plan enough?

Many think act has too many holes, won't save homeowners in timely matter

CHICAGO — Help is on the way for some debt-plagued homeowners. It just might not be fast enough or broad enough to keep many of them from losing their homes.

The mortgage relief plan that President Bush was poised to sign as soon as early as today is designed to rescue about 400,000 homeowners by allowing them to get more affordable mortgages backed by the Federal Housing Administration.

But consumer advocates and some economists think the housing act doesn't go far enough to save those whose homeownership is in peril.

The foreclosure avoidance program is scheduled to start on Oct. 1, but help might not arrive for months after that, and individual homeowners have no assurances they will be among those rescued.

"What happens to the people who are falling off the ledge right now? The answer is they're going to keep falling," said James Carr, chief operating officer of the National Community Reinvestment Coalition, a consumer group in Washington.

Skeptics point to the relatively small percentage of troubled homeowners who would be aided by the plan, which is part of the most significant housing legislation in decades. Nearly 2.8 million U.S. households are expected to face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage balance by the end of next year, according to Moody's Economy.com.

Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said the legislation probably will help the less distressed households among those flirting with foreclosure while leaving others to fend for themselves.

"It's got its heart in the right place, but I don't think it's enough at this point," he said. "It will help some households, but it's not going to be the silver bullet to clean up the housing crisis."

And it probably won't be helping anyone right away. "Because of the problems faced in setting this up, it's highly likely that this program won't be fully operational until the early part of next year," Carr said.

The Department of Housing and Urban Development, which oversees the FHA, already is trying to fend off suggestions of inevitable delays.

HUD Secretary Steve Preston told reporters Tuesday the government plans to have the program in place by its start date, but he criticized lawmakers for not including the requested funding to implement it.

To be eligible, homeowners must live in the home, must have been paying at least 31 percent of their income toward their mortgage as of March 1 and must have their income verified by the bank.

But participation in the program is voluntary for lenders, and that looms as a potentially major obstacle to the program's success. Since the banks and financial firms that handle the mortgages will have to agree to let the borrower refinance, they might end up losing less if they let borrowers go into foreclosure.

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