There are two really big flaws with Obama's housing plan, one that may very well cause its failure and the other is going to really upset the majority of Americans when stories start to get out.
The first big flaw with the housing plan is that it simply doesn't seem to acknowledge historical home ownership rates and is essentially trying to re-inflate/prop up a market that needs to return to its historic average. The historic average home ownership rate is somewhere between 64-66% (we are now still at 68%), thus there are still a lot of people in homes that really shouldn't be in them. This housing plan is attempting to keep people in homes that they shouldn't be in at the expense of renters/non-troubled homeowners. This simply will not work over the long run, as prices in many places are still too high and will continue to fall even without foreclosures and more importantly the modification plan will prevent prices from recovering, as those that got the mods will be able to sell at lower prices (while still profiting due to the modification), while their neighbors who did everything right will be penalized by not only losing money on their homes, but watching their neighbors reap rewards of being less responsible.
The second and possibly more troubling aspect of the housing plan is the recently detailed section on second liens (ie home equity lines). It appears that the housing plan is attempting to get the second lien holders to reduce/eliminate these debts (they provide an incentive for this). This is very problematic, as many/most of these equity lines were used to fuel consumption above and beyond people's means (ie they get to keep the flat screens, super kitchens, and cars for free). Again, this is really punishing the responsible homeowners, and I think when this part of the housing plan gets press, it is going to really create some major political fallout, as it's one thing to help your neighbor keep their home, but it's totally different to give them a free tv, car, or vacations too.
link to treasury's housing fact sheet