Across the state, as many as 100,000 homeowners could face mortgage trouble, a separate report showed Wednesday.

First American CoreLogic said nearly 40,000 Iowa homeowners have mortgages for more than their homes are worth, and another 60,000 are within 5 percent of being underwater.

 Owing more on a mortgage than the home is worth makes refinancing loans difficult as interest rates reset higher, a common problem in mortgage defaults and foreclosures, experts say.

Officials said the Obama plan, which enables as many as 9 million Americans to modify or refinance their mortgages, should help reduce foreclosures and stabilize home values in Iowa.

The housing plan will help homeowners who are current on their loans refinance their mortgages with 80 percent to 105 percent loan-to-value ratios. For example, a homeowner with a 100 percent loan-to-value ratio has no equity in the home. Homeowners generally needed 20 percent equity to refinance.

The Obama plan also would enable homeowners who are behind in their mortgages, including those in foreclosure, to modify loans owned by Freddie Mac or Fannie Mae.

The government-owned mortgage companies own or guarantee almost 31 million loans nationally - more than half of all U.S. mortgages. The plan also includes incentives - $1,000 to the lender - for every loan modified. Obama has said the loan modification plan would cost $75 billion.

"We're very hopeful that this will be a turning point in the battle against foreclosures," said Patrick Madigan, an assistant Iowa attorney general. The state office helped set up a hot line to help Iowans struggling with foreclosure. "It's an aggressive and comprehensive plan."

A third-quarter national bankruptcy report showed that nearly 27,000 Iowans are either in foreclosure or are delinquent on their loans. A new report is expected today from the Mortgage Bankers Association.

"In some of these cases, assistance might be just what homeowners need," said Tom Coates, executive director of Consumer Credit of Des Moines, a credit counseling service. "In others, quite frankly, they moved into more house than they should have, and they really need to get out.

"To hold them in that house would actually be a disservice in a lot of ways. It's not always the best thing," he said.

Seattle-based Zillow.com said about 43 percent of the Des Moines area's mortgages would qualify to refinance under the Obama plan.

Nationally, 25 percent of mortgages could qualify. A higher percentage of Iowans could qualify for assistance because home values have been flat and down payments tend to be smaller, experts say.

Zillow.com also said about 5,400 Des Moines homeowners have loans that exceed 105 percent and will fail to qualify for assistance.

Matthew Covington, a community organizer for Iowa Citizens for Community Improvement, said the plan can't help everyone but is a "move in the right direction."

"Do you want families living in your neighborhood or vacant, foreclosed homes that are a blight to the neighborhood and lowers property values?" Covington said. "We're not talking about irresponsible folks. We're talking about people who have lost their jobs and are experiencing a crisis and now are struggling to stay in their homes."

Thomas Kono fell behind in his home mortgage payments after learning he had cancer in August. Kono said his lender seeks to foreclose on him and his family, who have lived in their Des Moines home for six years.

The former meatpacking worker is seeking disability payments while he continues with his medical treatment.

He's hoping his mortgage - now $1,000 a month - can be modified and the monthly payments lowered under the Obama plan. "I have to wait to see what the mortgage company says," Kono said. "We're very unsure" about the future.

Dan Vessely, president of Iowa Bankers Mortgage Corp., said he hopes the plan helps "ward off the foreclosures coming down the road."

"We'd like it if the help truly gets to the people. We don't like it when programs help people who may not be deserving or who were foolhardy to begin with. Drawing that line is going to be very difficult. However, there are a lot of safeguards in the plan," he said.

Madigan applauded the loan modification program that requires the new monthly payment to be less than 31 percent of the borrower's income.

Often with past modifications, monthly payments could actually increase when missed payments, interest and fees were rolled in.

Madigan said lenders will be asked to look first at reducing interest rates to lower monthly payments, then to extending the length of the loan. The last effort will be to look at "principal forbearance" - or putting part of the principal at the end of the loan as a balloon payment.

Vessely said changing economic conditions are changing the affordabililty of even conservative loans.

"This program will help someone who could have had a very affordable home, a very affordable loan and interest rate, but now, because one of the spouses have lost their job, their financial position has changed substantially," he said.

"There could be a significant audience for this program in Iowa as unemployment goes up and home values go down," Vessely said.

SOURCE: desmoinesregister.com