Nick Timiraos reports:

President Barack Obama’s housing stability plan is less accessible to homeowners in the nation’s hardest hit housing markets, according to data from real estate Web site Zillow.com.

The plan offers borrowers with little to no equity in their homes the opportunity to refinance their loans, among other provisions. But there are two major restrictions that limit borrowers’ eligibility to refinance. That plan is limited to loans within the conforming limits that are eligible for backing from Fannie Mae and Freddie Mac, which stand at $417,000 for most of the country but rise to as high as $729,750 in the most expensive housing markets, and to borrowers that have a loan-to-value of 80% to 105% on their first mortgage. A separate initiative would allow some underwater homeowners to apply for a government subsidized loan modification.

Nationally, one in four mortgage holders meet two major eligibility criteria for the refinance proposal, but that number falls in certain housing markets that have been the hardest hit by the housing downturn.

Only 9% of mortgage holders in the Los Angeles metro area are eligible to refinance, according to Zillow research. An additional 8% of borrowers have a loan-to-value that exceeds 105%, and another 8% of borrowers have loans that meet the 80%-105% loan-to-value criteria but are so-called “jumbo” loans that exceed the conforming limits. (An article in today’s WSJ looks at some of the other problems hitting jumbo borrowers: Jumbo Mortgages, Jumbo Headaches)

The result? “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.com.

Here’s a closer look at how many borrowers are — and aren’t — eligible to refinance in specific housing markets:

• In Miami-Fort Lauderdale, around 17% of mortgage holders meet the refinance criteria. Of the borrowers that don’t qualify, one-quarter have conforming loans that exceed the required 105% loan-to-value and 6% have jumbo loans.

• In New York and northern New Jersey, nearly 16% of all borrowers could be eligible to refinance. In the pool of ineligible borrowers, 3% of borrowers are too far upside-down in their homes, and nearly 9% of borrowers have jumbo loans.

• In the San Diego region, some 12% of borrowers could qualify for the plan. Of the excluded borrowers, some 13% of conforming borrowers exceed the 105% loan-to-value limit, and 17% have jumbo loans.

• In San Francisco, some 8% of borrowers could be eligible. Of the excluded borrowers, around 7% of conforming borrowers exceed the 105% loan-to-value limit, and 21% have jumbo loans.

• In the San Jose-Santa Clara, Calif. metro area, just 7% of borrowers could qualify for the plan. Of those excluded, 3% don’t have enough equity and 25% are jumbo borrowers.

While Mr. Humphries says the plan is “certainly better than nothing,” he says that the limited impact on the nation’s hardest-hit markets could undermine the goal of stabilizing home price declines by stemming foreclosures.

Readers, what do you think? Will you be able to take advantage of this component of the housing stability plan? If you’re planning to refinance through this program, or if you’d like to but you’re excluded by loan limits or loan-to-value limits, we’d like to hear from you. Email: nick.timiraos@wsj.com.

A roundup of economic news from around the Web.

Compiled by Phil Izzo

Nick Timiraos reports from New York:

Associated Press

Mr. Donovan testifying on Capitol Hill on Jan. 13.

Housing and Urban Development Secretary Shaun Donovan said Friday that the federal government “must accelerate loan modifications” and cited a “desperate need” for industry-wide standards to govern those alterations.

The White House is preparing to roll out its own plan to deal with foreclosures and the housing market, and some $50 billion in money from the Troubled Asset Recovery Program has been earmarked to help stanch foreclosures. President Barack Obama could outline further steps next week during a swing through Denver and Phoenix, where home prices fell by 33% in 2008, among the worst such declines in the nation.

Mr. Donovan, the former New York City housing commissioner, offered few details about what steps the administration would take during a speech at New York University. The HUD secretary cited a need for bankruptcy reform in order to create a “safety net” for those who couldn’t be helped by loan modifications, and said that if loan modifications accelerate, it was possible that “very few” homeowners would have to resort to declaring bankruptcy.

The HUD secretary outlined a range of longer term goals that include repairing the mortgage-finance system, improving low-income rental housing and promoting sustainable growth. He also called for modernizing HUD programs, which he said were “at least a generation behind where they must be.”

Donovan also called for greater accountability within his agency so that it could better explain how it had spends its resources, and he referred to the relationship between Congress and HUD as “disturbing.”

One of the biggest questions surrounding the Obama administration’s economic plan is how will the country know it is working. In his press conference tonight, President Barack Obama outlined some metrics, but judging success using them won’t be easy and it will surely take some time.

“I think my initial measure of success is creating or saving 4 million jobs,” Obama said. “That’s bottom line number one, because, if people are working, then they’ve got enough confidence to make purchases, to make investments. Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step number one: job creation.”

On the surface, that looks like a relatively easy metric. The Labor Department provides the relevant data every month on changes in the job market. However, measures of success are going to take some time, and if they do emerge they may be hard to gauge. The goal of the stimulus package as it was first proposed was to save or create four million jobs over two years. Already, Berkeley economist Brad DeLong estimates that the changes in the Senate may have trimmed 600,000 jobs off the original estimate. New jobs are going to show up over time, and there even will be a lag once the stimulus is signed for jobs to begin showing up. Meanwhile, the labor market traditionally continues to feel pressure even when the economy recovers from a recession.

But even though the situation remains difficult, there might be some signs that things are getting better. For the past three months, the economy has shed more than a half a million jobs a month. If that figure starts to abate, it could offer a sign that the president’s plans are having an effect.

“Step number two: Are we seeing the credit markets operate effectively?” Obama said, outlining a second metric of success. This one is probably hardest to gauge. The Calculated Risk blog has pointed to several credit crisis indicators in a running series. Those measures have shown some improvement over the last few months. If things continue to stabilize that’s one way to check that the credit markets are returning to normal.

Another sign could come when banks report first-quarter earnings. The Journal did an analysis of lending practices based in part on data from fourth-quarter results. Banks remained tight fisted, which is to be expected in a recession, but if the situation begins to improve in the first quarter, it may show up in earnings reports in April.

Also in April, the Federal Reserve will release its next loan officer’s survey. The January report showed a continued tightening of lending standards, but stable credit markets may get banks to loosen the purse strings.

“Step number three is going to be housing,” Obama said. “Have we stabilized the housing market? Now, you know, the federal government doesn’t have complete control over that, but if our plan is effective, working with the Federal Reserve Bank, working with the FDIC, I think what we can do is stem the rate of foreclosure and we can start stabilizing housing values over time.”

It’s a tall order to expect the government to be able to stabilize home prices. A recent report from Moody’s economy.com said that the S&P/Case-Shiller home-price index still has another 11% to fall from the fourth quarter before stabilizing late next year. Some economists even argue that the government shouldn’t focus on propping home prices.

But there is wider opportunity for action of foreclosure rates. The Obama administration plans to work to stem foreclosures through loan modification programs. Democratic officials also have voiced support for allowing bankruptcy judges reduce the principal on mortgages, a process known as a “cram down.” That provision wasn’t part of the stimulus package in the House or the Senate, but the issue could move through with separate legislation later.
The Mortgage Bankers Association and RealtyTrac both compile data on foreclosures. The Commerce Department’s data on home vacancies also may offer some clues on whether foreclosures are ebbing. However, success isn’t likely to be apparent until much later this year.

Finally, Obama said: “The most — the — the biggest measure of success is whether we stop contracting and shedding jobs and we start growing again.” He appeared to be talking about general economic growth, apparent in the Commerce Department’s report on gross domestic product. In last month’s Journal forecasting survey, economists didn’t expect to see growth return until the third quarter of this year, even factoring in a stimulus package.

No matter what metric is used, it will take some time to see whether the president’s plans have been successful. But for his part, Obama knows recovery isn’t going to happen overnight. “Now, you know, I don’t have a crystal ball. And as I said, this is an unprecedented crisis,” he said. “But my hope is that after a difficult year — and this year is going to be a difficult year — that … if we get things right, then, starting next year, we can start seeing significant improvement.” –Phil Izzo

A roundup of economic news from around the Web.

Compiled by Phil Izzo

President Barack Obama has asked his top advisers to brief him every morning on the condition of the economy, the White House said Thursday.

Obama will get daily briefings on the economy. (Landov)

White House spokesman Robert Gibbs, speaking to reporters at his first official briefing since Obama took office, said the president’s economic team, led by National Economic Council Director Larry Summers, will walk him through the day’s economic news each morning. The president receives a similar daily intelligence briefing.

The first economic briefing occurred earlier Thursday and was attended by the president, Summers, Vice President Joe Biden, White House Chief of Staff Rahm Emanuel, Budget Director Peter Orszag, Domestic Policy Director Melody Barnes and Biden’s economic adviser Jared Bernstein.

It’s unclear if Obama’s Treasury Secretary will attend the sessions, once confirmed. The president’s nominee for the position, Tim Geithner, was approved by the Senate Finance Committee Thursday, clearing the way for full Senate confirmation.

Gibbs said Obama was “very pleased” with the Finance Committee’s vote.

The spokesman, addressed a jam-packed briefing room, offered few new details of the administration’s plans to revive the economy, saying that the White House is working as quickly as possible.

He declined to address the possibility of the administration creating a new bank to buy up toxic assets, leaving such announcements to the administration’s economic braintrust.

“I don’t want to get ahead of the economic team as to the best way forward to ensure economic stability,” Gibbs said. –Henry J. Pulizzi

With hundreds of billions in stimulus spending up for grabs shortly after the holidays, Congress is being deluged with wish lists for tax breaks for specific industries.

Business lobbying groups ranging from carpet and rug dealers to hotels to biotech companies all want to make sure they do not get left out of the bounty. They are making their voices heard with lawmakers and members of the incoming administration of President-elect Barack Obama.

Biden, joined by Summers, pledged not to back earmarks in the stimulus. (Associated Press)

The size of the package, which could reach as high as $1 trillion, and the lack of details on its contents have led to an unusual profusion of lobbying activity.

“The most staggering thing to us about this stimulus is that it’s a big number without any definition,” said Steve Ellis, vice president of the spending watchdog group Taxpayers for Common Sense. “When you have that lack of definition, it brings a large number of lobbyists to the table to try to fill in the blanks.”

Vice President-elect Joe Biden told reporters Tuesday that the Obama administration will not support “earmarks” in the package. While an earmark is usually considered to be a lawmaker’s pet project, Biden didn’t define what he meant.

“There will be strict accountability here. And there also will be no Christmas tree, notwithstanding the season,” Biden said, before a meeting with Obama economic advisers.

Furniture dealers and rug and carpet retailers want Congress to provide consumers with a $500 to $1,000 refundable tax credit they can use to buy home furnishings. The credit would be available only to those with incomes of $50,000 or less, but higher-income families would be able to deduct 10% of home furnishing costs, according to a one-page industry proposal.

Such a tax credit “fits conceptually within the Obama economic stimulus plan and the Obama economic philosophy of strengthening the economy from the bottom up,” the industry paper says.

Biotech firms, which typically face losses in their early years because of the intense research needed to bring a product to market, are looking for additional research subsidies through the tax code.

Biotech groups have proposed a refund for net operating losses, essentially giving them cash upfront if the firms agree to forgo the larger tax benefit to which they would eventually be entitled. That benefit could be limited to smaller firms and come with a dollar cap, according to an industry white paper.

Meanwhile, hoteliers want an enhanced tax credit for hiring individuals that have been receiving unemployment benefits.

The Work Opportunity Tax Credit, now used widely by hotels and restaurants, offsets 40% of the first year’s wages — up to $6,000 — of certain employees, including families eligible for welfare assistance, ex-felons, and youths living in empowerment zones. The hotel industry wants to add individuals who are receiving unemployment benefits, or who have exhausted those benefits.

Since many companies are not profitable in the slumping economy, proposals to make tax credits refundable are particularly popular. Wind and solar energy groups are pressing for renewable energy tax credits to be made refundable.

In addition to narrowly targeted provisions, large business groups are lobbying for tax breaks that would benefit firms across sectors.

Leading proposals include extending the period businesses are able to carry back net operating losses, from two years to five years; renewal of one-year “bonus” depreciation benefits, which allow companies to write off 50% of new equipment costs in the year that equipment is purchased; and a tax holiday for offshore income that would allow pharmaceutical, high-tech and other manufacturing firms to bring profits back to the U.S. at a reduced rate.

Obama administration officials are expected to send their stimulus proposal to Congress soon. Congressional leaders have said they want to pass legislation before Jan. 20, the day Obama will take office.

Many details of the package are yet to be decided, including how much of it will go toward individuals, how much to businesses through the tax code, and how much through direct appropriation for infrastructure spending, state aid, and other priorities.

Senate Finance Committee Chairman Max Baucus (D., Mont.) this month said he believes business tax relief in the bill could total as much as $350 billion. –Martin Vaughan

For U.S. consumers, 2009 is likely to be the year of saving, rather than spending.

Although some burdens, such as gasoline prices, have lightened considerably, the cons for the household sector still outweigh the pros. That’s why economists are downbeat on overall economic activity in 2009. A full-fledged recovery will depend on a resurgent consumer, who even after the recent pullback still accounts for 71% of all spending.

The biggest headwind for consumers is, not surprisingly, the weakening labor market.

It isn’t just the loss of 1.9 million jobs so far in 2008; it’s the job jitters triggered by those layoffs. If consumers worry they may be laid off, they will spend less whether or not their fears turn into reality. But less spending weakens the economy and job markets further.

Mending the job markets will be pre-eminent to turning around the economy. That’s why President-elect Barack Obama has upped the ante in his stimulus package, now promising to create three million jobs, instead of 2.5 million.

But an offshoot of the weak labor market — wage freezes, benefit cuts and smaller pay raises — also will hamper consumers.

The Conference Board reported last week that since the credit markets have gone into the tank, businesses have scaled back on their 2009 salary plans.

When the board surveyed companies in April and May, pay increases of 2.86% were planned for hourly nonunion workers; executive pay raises were set at 3%. But the board’s survey in October showed the raises were lowered to 2.5% for hourly workers and 2.8% for executives.

Financial blog Calculated Risk posted a listing Tuesday of media reports of salary freezes, ranging from energy group Duke Energy Corp. and tech services group Unisys Corp. to city workers in San Francisco and teachers in South Carolina.

Luckily for consumers, their purchasing power should improve as prices fall or increase at slower rates.

The plunge in energy prices is the biggest plus going for consumers right now.

Gasoline prices are down about $2 per gallon since the peak in July. Joseph LaVorgna of Deutsche Bank estimates that every $1 drop in gasoline adds about $100 billion to household cash flow — meaning households have an extra $200 billion to spend on items besides gasoline. That amount is bigger than the rebate checks sent out earlier in 2008.

In addition, heating-oil and natural-gas prices are down since the summer. So the coming winter should prove to be less onerous than was feared when crude oil shot past $140 per barrel.

The holiday shopping season has also brought a ton of bargains for consumers. Although door-busters and 20%-off coupons are the kiss of death for retail profits, consumers looking for flat-screen television sets, cashmere sweaters, or toys, are benefiting greatly.

Finally, there are trends that cut both ways across the consumer sector.

Extremely low interest rates, for instance, are great for borrowers. Homeowners in good financial shape and with equity in their homes have rushed to refinance their mortgages now that rates have fallen close to 5% for a 30-year loan.

But low rates are a drag for savers. Data from the Federal Reserve show that households — spooked by the stock markets — have boosted their holdings of interest-bearing accounts by about $250 billion so far this year. But interest income has fallen by $25 billion over the same time, hurting retirees and others on fixed incomes.

Interest earnings will fall further in 2009, now that the Fed has cut its lending rate to near zero.

Falling home prices are a boon for house-hunters; but a bane for sellers and for homeowners who have seen their home values plummet. Dropping stock prices, meanwhile, are good for those newly enrolled in 401k plans; but they have been a disaster for people in or near retirement.

What may be the biggest plus for the U.S. consumer sector is its ability to look forward. A survey by the Investment Company Institute in October showed that despite market volatility, investors remain committed to saving for retirement. Only 3% of participants have stopped making contributions this year.

And consumers are hopeful about the coming stimulus plan. A survey by the Center for American Progress indicates 70% of Americans think government spending on infrastructure is “the right thing” to do given current economic circumstances. Infrastructure spending will go a long way to create jobs in 2009.

Many households also should benefit from the other stimulus ideas being bandied about. A middle-class tax cut, aid to state and local governments, and investment in education should be pluses for the consumer sector in 2009. –Kathleen Madigan

A roundup of economic news from around the Web.