We've been closely tracking the administration's $75 billion program to help homeowners avoid foreclosure. And while it's clear that a major problem is that mortgage servicers are simply overwhelmed, the Wall Street Journal identifies a more worrying difficulty: The program was mainly geared to help people get out of expensive, nontraditional loans, but the country's unemployment rate is high and rising, and the program doesn't have an option for those who've lost their income.

The Journal reports that the administration is batting around some ideas:

The administration is weighing whether it should provide more specific guidelines for how mortgage companies should work with borrowers who have lost their jobs but are believed to be good candidates for re-employment. It is also considering providing additional incentives to encourage servicers to offer forbearance plans.

Several Federal Reserve economists, meanwhile, have suggested the government pay a share of the mortgage payment, for a limited time, for borrowers who see a significant disruption in their income.

Other options include providing short-term loans to borrowers who have lost jobs, or giving special treatment to borrowers likely to become re-employed soon. Administration officials haven't taken a position on these options, and said each brings its own challenges.

Other links this morning:
Fed Chief Responds to Critics, Defends Handling of Merrill Sale (WaPo)
Judge Approves U.S. Financing for G.M. (NYT)
A.I.G. Gives the Fed Stakes in 2 Units to Trim Debt (NYT)
Car Liability, Dealers Pose New Hurdles For GM Plan (WSJ)
Plain-Vanilla Financing Could Melt Bank Profits (WSJ)