Stephen Foley: Foreclosure rate still taxing Obama

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US Outlook: In a nation whose government has always heavily intervened in the housing market, the problem of record foreclosures across the US is proving peculiarly intractable for the Obama administration.

Around 7 million borrowers are now seriously behind in their mortgage payments. With $50bn (£34bn) of the Wall Street bailout fund having been carved out to aid homeowners, it had been hoped that hundreds of thousands, if not millions, could have been helped into refinanced mortgages they were better able to afford. Actually, so far, only 200,000 people have been aided.

The roadblocks include tortuous paperwork, lack of clarity over who owns the loans (which were often sliced and diced on Wall Street), and the fact that many borrowers simply owe too much.

For these reasons, it is difficult to be optimistic about the success of yesterday's latest initiatives, which will extend government relief to – supposedly – 3 million more homeowners. A Rubicon is being crossed: banks are for the first time being encouraged to cut the size of the loan, rather than just the interest rate, for people in negative equity. The unemployed will also get aid for a limited time, too.

Rising foreclosures seem likely to push the US housing market into the second dip of their double-dip downturn, particularly now the Federal Reserve is ending its programme of mortgage purchases and tax breaks for first-time buyers are expiring.

The good news is that great swathes of the banking system are no longer leveraged to house prices, so a second credit crisis is not on the cards. The US economy is not so housing dependent, either, as manufacturing rebounds. For the economy, like the Obama administration's housing efforts, it is a case of muddling through.