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The answer to the housing crisis

 President Obama opened his first press conference of 2012 by addressing the immediate need for economic recovery last week and announcing that it was time for the government to “do everything we can to speed it up.”

Acknowledging that are still “millions of Americans who can’t find a job” and “millions more who are having a tough time making the rent or the mortgage, paying for gas or groceries,” Obama touted his proposal before Congress that would, he claims, effectively put an average of $3,000 in savings back in homeowner’s pockets. In addition, to make refinancing more attractive, Obama proposes cutting the fees associated with a new mortgage -- claiming such a move will “save” homeowners an additional $1,000.

The president wrapped up his “big” proposal for saving underwater homeowners by saying “There are real things we can do right now that would make a substantial difference in the lives of innocent, responsible homeowners.”

At least there’s one thing that President Obama and I can agree on about the housing market. There are real things we can do right now. Unfortunately, the weak measures he proposed on Tuesday will prove to be ineffective. A quick look at the numbers tells the real story about just how much his proposed “savings” will help homeowners who are drowning in debt.

Imagine a homeowner who is carrying a $300,000 balance on her mortgage. She is struggling to stay current on her payments of about $3000 per month. Perhaps sometime in the past few years she had a medical emergency, lost a job, got divorced -- maybe the interest rate on that balloon mortgage she was talked into has pushed a once-lower payment suddenly sky-high. 

President Obama wants her to refinance her home to get a lower interest rate. He says she will save $1,000 in fees (that she is not currently paying, anyway) and her monthly mortgage payment will drop -- by about $300 per month. 

Is this a life-saving deal? Not even in the best of circumstances.

Consider that her house is only worth about 50% of what she originally paid for it. That’s right. This homeowner is underwater for $150,000. She could sell her house and get the $150,000 cash -- maybe. But she will still owe her mortgage company $150,000. 

Tell me how $3,000 or $4,000--or even $10,000--a year is going to help this homeowner?

Even if she could literally bank $10,000 a year; even if the cost of groceries and gas stopped rising; if college education became affordable; if her medical costs were cut in half; if the job market suddenly flourished...even if everything else got better, she would still need 15 years or more to pay off the balance of a house she had sold if she planned on using the “savings” promised by the government. 

Furthermore, once she was homeless, where would she live as she drained her “savings” in order to continue to pay off debt on a house she no longer owned?

Now multiply this one scenario by the 11 million families estimated to be underwater on their mortgages. And tell me again: how does $3,000 a year help?

The answer to the housing crisis does not lie in making it easier for homeowners to continually renew the mortgage debt that is crushing them. 

The answer lies in reducing the principal amount of the loans. 

The “innocent, responsible homeowners” the president is intent on helping will be best served if they can refinance their homes for the amount the home is worth.

The mortgage companies that created this mess with “free money” loans might suffer in this scenario. But homeowners? They might just stand a chance.

Bob Massi is an attorney and Fox News Legal Analyst. Watch him discuss the foreclosure crisis and housing issues every Thursday on "Fox & Friends."  

Robert Massi is a legal analyst for Fox News Channel.