In this Miami Herald Article, there’s a nice FAQ about who qualifies for the Obama mortgage relief program’s Phase 1.Although many people are in disbelief, there’s actually a substantial number of people with good credit, who made down payments and have loans with Fannie or Freddie that have fallen under water in the last 12 months:

Under the plan, only first mortgages can be refinanced. Borrowers must not have been more than 30 days late in the previous 12 months.

Grant Stern, president of Bay Harbor Islands-based Morningside Mortgage, said that because lenders have already been modifying loans, the refinancing plank of Obama’s plan would be the most beneficial to South Florida homeowners.

“There are lots of responsible people who put down 10, 20, 30 percent in the last two to three years and wound up losing their equity because the market wiped it out. . . . This will help them trim the sails during tough times.”

It’s nice to see that after all of the bizarre bailouts pushed by President Bush in the name of not bailing anything out, there is finally a sensible plan to offer an olive branch to at least 1 segment of the property owning public.In particular this is aimed at those who were responsible about home owning, but is also caught in a market like those who speculated and failed, which is driving their home equity into the turf. This is the first bailout program (or section of a program) that does not have any moral hazard, but is simply aimed at providing relief to those who did the “right thing” by making a down payment to buy, paying on time, and are stuck in fixed rate loans above the current market rates.

In my humble opinion, until lenders start reducing principal balances, or selling loans at a discount, we won’t see a firm floor in the foreclosure crisis.