WASHINGTON » Once again, the government has offered another plan to help troubled homeowners. Once again, critics say it doesn't go far enough.

New Hope For Homeowners Facing Foreclosure

 

The Bush administration unveiled a plan to help financially strapped borrowers keep their homes.

 

[ Watch ]

 

 

 

 

  The plan announced yesterday by federal officials and mortgage giants Fannie Mae and Freddie Mac sounds sweeping in its approach: Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.

But there's a catch. The plan focuses on loans Fannie and Freddie own or guarantee. They are the dominant players in the U.S. mortgage market but represent only 20 percent of delinquent loans.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the plan “;falls short of what is needed to achieve wide-scale modifications of distressed mortgages.”;

With the government spending billions to aid distressed banks, “;we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans,”; Bair said in a statement.

Democrats on Capitol Hill aren't satisfied, either. “;When the loan is chopped up into a million pieces and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis,”; said Sen. Charles Schumer, D-N.Y.

The new mortgage assistance plan was announced by the Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, and other government and industry officials.

Officials say they hope the new approach, which takes effect Dec. 15, will become a model for loan servicing companies that collect mortgage payments and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.

James Lockhart, director of the housing finance agency, urged investors to “;rapidly adopt this program as the industry standard.”;