The President’s State of the Union address left little doubt that his focus, at least for the near future, will be on the economy. Referring to the simultaneous collapse of the housing and mortgage markets in 2008, President Obama recognized that “… it plunged our economy into a crisis that put millions out of work, saddled us with more debt, and left innocent, hardworking Americans holding the bag.” For the distressed mortgagee listening to the President speak, the State of the Union address was either the beginning of a new initiative to provide relief from mortgage woes, or an indicator that the government is still not ready to tackle the foreclosure crisis in this country.

The President outlined a mortgage refinance plan to allow homeowners to take advantage of currently low interest rates, and promising “no more red tape” and “no more runaround from the banks.” As promising as such a program may sound, it will not help the distressed mortgagee who, under current lender underwriting guidelines, would not qualify because she is in arrears or in foreclosure on her current mortgage.

The federal government’s existing programs to help homeowners have not fulfilled initial expectations. Two years ago the federal government instituted the Homes Affordable Modification Program (HAMP) and the Homes Affordable Refinance Program (HARP) to assist people who were having difficulties paying their mortgage, or who whose mortgage loan balances exceeded the market value of their homes. One year later, only 4 percent of eligible homeowners had received modifications under the HAMP program. Similarly poor results were experienced by the HARP initiative.

Why did HAMP and HARP relief not reach the millions of homeowners targeted by each program? The programs relied on the participation of mortgage lenders, not all of whom were willing to participate fully. The President’s State of the Union promise of another mortgage refinance program sounds like a 2012 version of HARP.

For the millions of Americans who are in foreclosure, the answer is not another government created refinance program. Many people own homes they cannot sell or afford because they owe more than their homes are worth. For them, refinancing is not the answer unless it also includes a reduction of the mortgage balance. A move the President did not appear ready to embrace in his address to Congress.

The financial institutions currently holding these “upside down” mortgages are going to suffer losses once they acquire the properties in foreclosure and attempt to resell them. Taking the loss now by reducing the principle balance and restructuring the loan would provide the relief for distressed mortgagees envisioned by the HAMP program over two years ago, and represent a step toward resolving the mortgage crisis.

Frederick A. Neustein is an attorney in The Neusetein Law Group, P.A. which focuses on foreclosure cases for its clients in Miami-Dade County, Broward County, Palm Beach and throughout the State of Florida.