CNBC says that the mortgage plan to be unveiled by President Obama tomorrow (not Tim Geithner) will concentrate on buying down interest rates for troubled borrowers, not writing off principle for those who own houses that have fallen in value.
If you own a home that has lost hundreds of thousands in value, dropping the rate on the mortgage does not give you much incentive to stay in the home. If they focus purely on rates, default levels will stay high as owners with little skin in the game mail the keys to the bank and wash their hands of their losses. If true, this plan sounds like another mis-step.
