President Obama's mortgage plan aims to help those who owe more on their homes than their homes are worth.

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resident Obama on Wednesday unveiled a new mortgage relief plan for an estimated 3.5 million struggling Americans who owe more on their homes than the properties are worth — and, therefore, can't get new loans at today's low rates. By securing these people federally insured loans at reduced rates, Obama says, the program would save borrowers an average $3,000 a year. A new tax on big banks would cover the program's cost — $5 billion to $10 billion — a strategy Republicans oppose. Could Obama's plan really help Americans who are "underwater" on their mortgages?

Helping underwater homeowners helps everyone: Today's rock-bottom interest rates should be helping to "spur economic recovery," says Matthew Yglesias at Slate, by letting people refinance, and spend the savings on other things. But the millions who owe more than their homes are worth can't get new loans. If Obama can get this passed so underwater homeowners can get relief, he might have "finally hit on a job-creation idea that could be a game-changer."
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This would make matters worse: "Uncoordinated and ever-changing government programs" like this one only "create uncertainty in the market," Frank Keating, chief executive of the American Bankers Association, tells The Wall Street Journal. And uncertainty drives up costs for everyone. Also, the proposed tax on banks would make it harder for them to lend at a time when we should be expanding the availability of credit "to support home ownership and the economic recovery."
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Even if it fails, the plan helps Obama: Republicans won't approve a new bank fee — they've rejected two similar ones in the last two years, says Constantine von Hoffman at CBS News. But while that's "bad news for some homeowners in need, it could still be good news" for Obama. He's "campaigning as the alternative to the much-loathed do-nothing Congress," and this might convince voters in electoral battlegrounds hit hard by the housing crash — like Florida, Nevada, and Arizona — that Obama's on their side.
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