President Obama’s most recent housing proposal will unfortunately not solve our nation’s foreclosure crisis because it does not have a principal write-down while Fannie Mae, Freddie Mac and high ranking administration officials do not understand the extent of the problem.

From The Hill:

Obama on Tuesday outlined a plan to allow millions of underwater homeowners — those who owe more on their homes than their houses are worth — to refinance at historically low interest rates. The president said his proposal would save "responsible" homeowners about $3,000 each year.

"Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief," Obama said during his annual State of the Union address. "No more red tape. No more runaround from the banks."

“Still, the Democrats aren't holding their breath for GOP cooperation, instead pushing Obama to act on his own. They're offering several alternatives to the president's refinancing plan.

“One scenario — known as principal pay-down — would allow underwater homeowners who file for Chapter 13 bankruptcy to skip interest payments for five years, instead directing the entirety of their checks toward the principal balance.

Another proposal — dubbed principal forgiveness — would let bankruptcy judges reduce, or “cram down,” principal balances outright — a power judges currently have over loans for vacation homes, yachts and other assets, but not for primary mortgages.”

The article continues...

FHFA Director Edward DeMarco wrote recently, would cost taxpayers $100 billion and require congressional approval. The second, DeMarco said in a separate letter, wouldn't benefit enough homeowners to make it worthwhile.

"Less than ten percent of borrowers with [Freddie and Fannie] loans have negative equity in their homes," DeMarco wrote last week to Lofgren. "Even if underwater borrowers are disproportionately represented in bankruptcy, the total number of borrowers who could be helped by this proposal is likely to be small relative to the overall population of delinquent borrowers."

"We need people who are committed to making a significant difference," Rep. Dennis Cardoza (D-Calif.) said Wednesday. "Anyone who understands the problem would understand that he [DeMarco] doesn't get it."

Fueling the Democrats' concerns, California has been hit harder by the foreclosure crisis than almost any other state, with one in every 254 housing units in some stage of foreclosure last month — the second highest rate in the country, according to RealtyTrac, an online foreclosure tracker. The national rate, by contrast, was one in every 634 properties.

We need to solve this problem with the administration and banks fully understanding what is at stake here. President Obama needs to take act on his own accord to fix this foreclosure crisis.