"There's a hole in the bottom of the ship, and its foreclosures. And it's sinking the US economy and we have to stop that hole first," Peter Skillern of Durham's Community Reinvestment Association said. "We've invested $2.5 trillion into the banking system to help save it. But it all started with foreclosures."
Last month's foreclosure rate was actually down significantly from the previous year. In January, foreclosures dropped 59 percent --the lowest since 2001.
But most experts say that was because of a Fannie Mae temporary foreclosure moratorium which will expire very soon.
Skillern and others say the worst is still to come.
"Unemployment is going up, not down and foreclosures will follow," Skillern said.
Obama's new plan forces banks which take federal bail-out money to cut rates and principal on existing home loans.
U.S. tax payers, even those who have always made timely payments, will help buy down rotten home loans.
Maybe the biggest change Obama wants with foreclosures has to do with bankruptcy. He wants to give judges the power to alter the mortgage loan.
Currently if a homeowner goes bankrupt, the judge can cut the credit card debt. But he can't touch the mortgage.
However, the bankruptcy rule must still pass through Congress and the changes could still take months to change conditions on the street.
