By ALAN ZIBEL
AP Real Estate Writer
WASHINGTON (AP) — To those on the front lines of the housing crisis, the Obama administration's pledge to spend $50 billion to combat foreclosures was a welcome change in the government's approach. But the actual plan won't be unveiled for at least a week and might not be enough to prevent the housing market's troubles from mushrooming further.
Housing counselors say the government's response to a huge surge in defaults and foreclosures over the past two years has been a failure. They blame former President George W. Bush's administration for sticking with voluntary programs led by the mortgage industry and not committing public dollars to foreclosure prevention.
They are hoping President Barack Obama will have more success, especially as foreclosures continue to grow. A Credit Suisse report published late last year forecast up to 10 million foreclosures by 2012, depending on the severity of the recession.
"The question is: Can we work to design a system where the banks recognize it's in their interest to avoid foreclosure?" Obama said Tuesday in Fort Myers, Florida, which has been devastated by foreclosures and sinking home prices.
Obama said he would announce his housing strategy in the coming weeks. Meanwhile, home prices are not expected to hit bottom until year-end at the earliest.
A report published this month by Moody's Economy.com projected that home prices will plummet by at least 50 percent in more than 30 metro areas in California, Florida and Nevada by the time the housing bust ends. More than 60 percent of all metro areas nationally are expected to see prices fall by 10 percent or more, the study found.
While Treasury Secretary Timothy Geithner's revised plan to stabilize the financial system offered few details about housing on Tuesday, consumer advocates said they were still confident that the forthcoming proposal would offer far-reaching help to borrowers.
"It's a tough problem," said Michael Calhoun, president of the Durham North Carolina-based Center for Responsible Lending. "They want to make sure to get it right."
Less patient was Democratic Rep. Barney Frank, chairman of the House Financial Services Committee. He issued a statement criticizing the administration for taking too long to put together a housing plan.
Frank also said he fears that $50 billion in funding "understates the amount that we will need" and called on lenders to halt foreclosures as the government develops its plans.
The Obama administration is expected to back a push in Congress — opposed by the mortgage industry — to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it "makes no sense" that judges are not allowed to do so. The mortgage industry argues that this prohibition allows lenders to charge lower rates.
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