The unveiling of President Bush's foreclosure relief plan was announced yesterday as foreclosure rates reached a record high of 0.78%. According to the White House, the plan could help as many as 1.2 million distressed homeowners.

The relief plan will include a five-year freeze on adjustable rate mortgages for homeowners that qualify. The announcement brought new hope to distressed homeowners facing higher interests rates and possible foreclosure.

"There is no perfect solution," Bush announced yesterday. "The homeowners deserve our help. The steps I've outlined today are a sensible response to a serious challenge."

However, the Bush administration is facing harsh criticism by many Americans who feel that lenders and borrowers should not be "bailed-out" for irresponsible loan practices.

Some responsible borrowers feel cheated by the relief plan. One reader posted a message on the MSNBC message board saying, "This is BS Mr. President. So my reward for spending wisely and not assuming loans that I have no ability to repay is to watch these schmucks get help from the government? Gee thanks..." Another says, "Why should the government jump in when someone makes a bad financial decision? What's next-don't make consumers pay interest on the credit cards they have used to overextend themselves? All Americans should be responsible for their financial mistakes. Stop blaming everyone else! Live within your means!"

The criticisms don't end there. Another reader reacted strongly by telling the government to, "Introduce a bill that eliminates ARM's; it's mafia style lending at best and unfortunately America is too stupid to see past their noses. I feel no pity for the dumb people that signed off on these ARM's. Let them go homeless. As for the lender, freeze the rate and skim every dime off your top end to pay for it. Then, when you're done paying: you are OUT OF BUSINESS."

Nonetheless, the new plan comes with stringent terms, stipulations, and qualifications that should be considered before reacting too strongly. The Center for Responsible Lending estimates that the plan will help only about 145,000 families, or 7% of subprime borrowers. The freeze is limited and disqualifies anyone with more than a 30-day delinquent mortgage payment. Borrowers who can't afford the loan at low introductory rates will also be ineligible. In addition, the plan only covers borrowers with adjustable rate mortgages resetting beginning in 2008 and excludes any who are judged capable of continuing to make mortgage payments at the higher reset rates.

Responsible homeowners must also realize how the plan could possibly benefit them since the recent wave of foreclosures has driven down home values and pushed the economy into recession. The plan is designed to bring stability and minimize the impact of the housing downturn on homeowners, neighborhoods and the U.S. economy.

Yet some industry observers say the foreclosure plan doesn't go far enough because it leaves too much discretion in the hands of the lenders. It also does not help people who will default on a second home, the real estate investors, the people who have already defaulted on their mortgages, or those whose loans will reset before January.

Even so, Moody's chief economist Mark Zandi says, "I think the plan is good in theory, but in practice, it's going to come up short. There are too many impediments to its widespread adoption by investors and servicers."

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