New plan for the mortgage mess

PRESIDENT Obama's plan to help homeowners who are underwater and facing foreclosure is big, ambitious and complicated.

Thank goodness for that.

Last week, Obama announced that $275 billion from the financial bailout package will fund the Homeowner Affordability and Stability Plan, designed to help up to nine million homeowners.

Until now, the government's response to the mortgage crisis that has contributed to a global financial meltdown has been . . . a phone number. The Hope Now hot line, created by the Bush administration, has been inadequate and ineffectual - it relied on a voluntary alliance of mortgage industry players, and didn't come close to fixing the problem.

Admittedly, the foreclosure problem is complex, begun with a stampede of high-risk mortgages that were then cut up and sold as securities. When home values fell, and when buyers of risky mortgages began defaulting on payments, the housing and financial markets detonated. Now, almost one in every 10 mortgages in the country are delinquent or in foreclosure. Millions have lost their homes, a tragedy that will continue if the government doesn't act.

The plan focuses on three areas: refinancing for up to 5 million homeowners to make their mortgages more affordable; an effort to keep struggling homeowners in their homes by modifying their loans; and an infusion of money into Fannie Mae and Freddie Mac to support low mortgage rates.

Details of the program, which begins in early March, are still being worked out. Meanwhile, many people are likely to complain that some borrowers - those who took out mortgages that they couldn't hope to afford - should not be rewarded at the expense of taxpayers and those homeowners who played by the rules. That's a given, but the plan does have restrictions: It shuts out speculators and "house-flippers." Other limits will shut out many in the high foreclosure states like Florida.

But critics should focus on a single word in the plan: stability. Every foreclosure, no matter what the reason, destabilizes neighborhoods, communities and cities. Every foreclosure has the potential to pull communities over the edge, contributing, as the White House says, to falling home values, failing local business and lost jobs.

Philadelphia's foreclosure problem is relatively small, and an innovative court-run mortgage mitigation program provides a good model for the rest of the country.

But we do have a related problem that threatens stabilization.

A new report sheds light on

the city's huge inventory of empty houses - they are abandoned

not by homeowners forced out

by foreclosure, but by an equally insidious

enemy: disrepair.

According to a report by the Women's Community Revitalization Project (funded by the William Penn Foundation), the city has far more houses than households to fill them. And the high cost of construction means that too many fall into disrepair to the point they can no longer be inhabited. Rather than focusing on building affordable housing, the city should focus on the relatively small investments in making existing homes inhabitable. As we see at the national level, empty houses can kill communities.

The city should position itself to take advantage of the new federal focus that has finally come to the housing crisis. *