A mortgage-relief plan being pushed by the government is supposed to help debt-laden homeowners across America. But it’s creating dashed hopes and fresh tensions in this city that mushroomed during the subprime-lending boom, the Wall Street Journal reports.

Shannon Kelly was excited when she first heard about the plan, rushing to tape a TV news report about it. But her hope of escaping a sinkhole of debt was short-lived: Her adjustable-rate mortgage doesn’t qualify for a bailout under the terms outlined by the Bush administration and the mortgage industry.

Across town, in a condominium development riddled with foreclosures, there was holiday cheer for Karey Kelly, who is no relation. With monthly payments on her $351,000 mortgage set for a punishing rise in January, the single mother already had applied for an extension of her rate when the government-backed initiative was unveiled. Her credit score is on the cusp of the limit, but “I’m pretty positive that I meet the plan’s criteria,” Ms. Kelly says.

The Bush administration has touted the plan, announced this month, as a potential lifeline for hundreds of thousands of subprime borrowers, as well as a means to cushion the economy from the mortgage meltdown. Supporters say the proposal to freeze interest rates for certain buyers and accelerate loan refinancing for others aims to target deserving debtors and avoid aiding those who really can’t afford their homes. Congress joined the rescue effort last week, passing legislation to help borrowers with mortgages up to $417,000 to secure refinancing.

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