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CINCINNATI (Reuters) - News that U.S. President Barack Obama is working on a plan to rescue homeowners from problem mortgages before they even miss a payment has pleased some Americans and angered others.
"This is fantastic," said Rick Williams, who has watched thousands of heartbroken homeowners struggle and fail to pay ballooning mortgages over the last few years as president of the nonprofit Home Ownership Center of Greater Cincinnati.
"It is very forward-thinking," said Williams. "Until now lenders are saying, 'We can't help you until you're three months delinquent.' And it's crazy. It's encouraging people to just get delinquent."
But Americans who chose moderate, conservative mortgages and carefully budgeted to meet all their payments are bitter that the government seems ready, yet again, to bail out people who took on more debt than they could afford.
"I pay my bills on time, I pay my mortgage on time, and I'll end up paying for them. I'm a Christian, and I'm a compassionate person, but I do believe people should learn to face the consequences," said Tom Jones, 41, a Cincinnati catering director who doesn't need help with his mortgage.
The Obama administration's plan, which is still evolving, would be open to borrowers who are making timely payments and yet spend a large share of their income to cover the mortgage. The government would subsidize their monthly payments under the plan.
Homeowners would face a uniform eligibility test to determine whether their mortgage payments were too high for their income level in an attempt to predict -- and head off -- future delinquencies and foreclosures.
But some analysts see the program as another step into the moral hazard of rescuing people from the consequences of their own behavior, effectively rewarding poor decisions.
"There is no good message that you are sending for the future other than 'If you get into trouble we will bail you out,'" said David John, a senior fellow at the right-leaning Heritage Foundation, a Washington think tank.
John is also concerned that dishonest homeowners will simply adjust their financial situations to make themselves eligible for the rescue plan, even if they could have continued to make their payments themselves with a little sacrificing.
"There is no test that I have seen that can't be gamed by someone who is clever enough and determined enough to do so," said John. "This is one of those many many things that on the surface sounds so much better than would work in reality."
But Williams, whose nonprofit teaches homebuyers about mortgage pitfalls, said he watched too many mortgage lenders give out bad loans to believe the housing crisis was caused by greedy homebuyers alone.
"When you have a lender saying 'Yes you can afford the higher amount, and we will give it to you,' ... you can't turn around and blame the homeowner," said Williams. "This is not an issue of homeowners walking in this with a scheme to get a home that they can't afford."
Besides, said Williams, the country is now so far into the credit crisis and recession that it is too late to be arguing about who caused the problem -- it's time to solve it.
"We're beyond that. The number of foreclosures is now impacting the very homeowners who followed the rules. But now they've lost their job in the recession and suddenly they can't do what they thought they could and they can't refinance because their house values have now dropped," he said.
Many homeowners who can afford their monthly payments have nevertheless found themselves "upside-down" in their mortgages, meaning they owe more to their banks than their houses are worth because of declining home values. For some, it makes more sense to walk away than continuing repaying the loan.
Americans in particularly hard-hit areas of the country, including sun-belt states like California, Florida, Nevada and Arizona, have watched their home values plummet as neighbors' homes went into foreclosure, leaving some new suburbs half-vacant and prey to crime, property decline and decay.
Homeowners in these areas may welcome the Obama plan.
"Because of the economic crisis that we have, a lot of things have changed, a lot of situations happened that no one foresaw. There needs to be help," said Craig McHugh, an unemployed sales manager from Chandler, Arizona, a Phoenix exurb hit hard by the foreclosure crisis.
While McHugh is not upside down with his mortgage, is meeting his payments and does not expect to benefit directly from the plan, he still supports the program.
"I suppose in a perfect world it would be nice that everybody got a little something, but at least (this gives) something to the ones that are in trouble," said McHugh. "I think that's fair, as fair as it can be."
Additional reporting by Tim Gaynor in Phoenix and Patrick Rucker in Washington; Editing by Eric Walsh