Obama Plan for Housing Flawed, Critics Say

For instance, says Pane, some modifications have lowered rates and brought homeowners current by tacking months of missed payments onto the principal. But if enough months are missed, the monthly payment still rises, and if the homeowner is out of work, payments are unaffordable anyway.

"Most of the homeowners I deal with want to pay their mortgage -- they want to do it," says Pane. "But most of them had no idea what they were taking out, they don't know the terms, and they just don't have the means [to pay]."

The new plan is far more ambitious and markedly different from the old ones. And without the government stepping in to provide some assistance, a negative feedback loop -- in which foreclosures and falling home prices cause more job losses, which only cause more of the same -- may never end. In some instances, foreclosure may remain the only viable choice, but at least there will be options for some homeowners to remain afloat.

"This isn't your father's foreclosure process," says Patrick S. Duffy, principal of MetroIntelligence Real Estate Advisors. "Left unchecked, the market could easily over-shoot and create more damage for years to come."

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