Homeowners in the country’s hardest-hit housing markets may get far less help than anticipated from President Obama’s $75 billion housing stability plan, according to an analysis by real estate Web site Zillow.com.

“Not as many people as you would expect in these markets that were previously overheated are going to be able to avail themselves of the plan,” says Stan Humphries, vice president of data and analytics for Zillow (The Wall Street Journal (“Hardest Hit Markets Unlikely to Get Relief From Obama Rescue,” Feb. 24, 2009).

Nationally, according to Zillow’s data, only one in four homeowners meet the eligibility criteria of the stability initiative, suggesting that far fewer than the 9 million troubled homeowners the government estimates could be helped will ever receive help with their mortgages.

Under the federal government’s new housing plan, certain homeowners who are underwater on their mortgages would be able to get a mortgage loan modification subsidized by the government, while other homeowners who have little or no equity in their homes would be able to refinance their home loans. However, in order to qualify for refinancing, homeowners must have a loan-to-value ratio of 80 percent but no more than 105 percent on their first mortgage, the Wall Street Journal reports.

Those With “Jumbo” Mortgages Least Likely to Qualify Under Plan

To be eligible for loan modification under the administration’s housing stability plan, homeowners must also have home loans that are within the conforming limits eligible for backing from government lenders Fannie Mae and Freddie Mac.

Currently, these conforming limits are as high as $417,000 for most markets in the U.S., and capped at $625,000 for homes in the most expensive housing markets in the country. This effectively prohibits many homeowners with “jumbo” mortgages — those who have loans above those conforming limits, depending upon the market — from participating in the new government program.

For example, in the Los Angeles area, one of the worst housing markets in the nation, only 9 percent of homeowners are able to refinance under the new initiative, Zillow research shows. An additional 8 percent of homeowners have loan-to-value ratios that exceed 105 percent, and another 8 percent of homeowners meet the loan-to-value criteria but have jumbo loans that exceed the government’s conforming loan limits for the area.

Zillow’s data also indicates a similar trend in the Miami-Fort Lauderdale area, where only 17 percent of mortgage holders are eligible for refinancing. Of those homeowners who fail to qualify for refinancing, 25 percent of those homeowners have loans that exceed the 105 percent loan-to-value requirement, while 6 percent have jumbo loans.

While Humphries acknowledges that the administration’s plan is “certainly better than nothing,” the Zillow vice president said the housing plan’s limited impact on the country’s hardest-hit real estate markets could ultimately end up marginalizing the goals of the program.

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