Kudos to president Obama for tackling the mortgage crisis head on. There are many things in his proposal that I like but I see some potential practical and political pitfalls. I think a major problem is going to be who gets the refis and who doesn't will be a major issue. I like the plan for the govt to underwrite a refi for everyones mortgage to a 3 or 4% rate. The problem with today's proposal is it still relies on incentives to mortgage servicers and the people who don't get their mortgage fixed for whatever reason are going to be pissed.if we are going to do a true "bailout" of homeowners then bail everyone out and fix the way mortgages are done for the future. If I was a Republican instead of whining about the cost of the plan I would say it's unfair to people who have equity because they paid 20% down.
Here is the problem in a nutshell, the people that put 20% down on their home to avoid PMI and get the best rate are really screwed right now. They may not be underwater yet (who knows in a few months) but they unlike no or low money down folks they have no leverage when dealing with the banks. I just don't see how it can be fair for the govt to pick and choose who gets refinanced out of bad interest rate loans as the mortgage compaines will still have the power not to help those with remaining equity. I think simply pressing the reset button on evryones mortgage would be the best solution, if you can't make the payments on a new 30 year note with an extremely low interest rate then nothing probably could be done in that case anyway.