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But that plan is off to a slow start. Many housing counselors say it hasn't made much of a difference nationwide because lenders have been slow or reluctant to cooperate. As of mid-June, about 50,000 borrowers were enrolled in three-month trial modifications under the plan, according to the Treasury Department. The administration initially had said up to 4 million households could be helped.

Critics in the mortgage industry are denouncing Obama's plan for government-approved mortgages. Some call it a paternalistic intrusion that would restrict borrowers' options and make loans harder to get and potentially more expensive.

Guy Cecala, publisher of Inside Mortgage Finance, a trade publication, called the idea "un-American." He said it would make the U.S. mortgage market heavily regulated, like those of Germany or France, where consumers have fewer options.

"We're a free-enterprise country," Cecala said. "We encourage innovation. This is certainly not going to encourage innovation. It will stifle it."

But others in the industry are open to the idea. A good mortgage broker should always show a borrower plenty of options, including the traditional 30-year fixed-rate loan, and explain the risks clearly, said Kevin Iverson, a mortgage broker with Reed Mortgage Corp. in Denver.

During the lending boom, unscrupulous brokers "were selling bad products because it was one of the ways people made more money," Iverson said. They focused on closing deals fast, he said, rather than building customer relationships that would endure for years.

If the Obama plan for simplifying the mortgage process is approved, here's how it might work:

The government would give its seal of approval to a handful of mortgage types — a standard 30-year fixed-rate mortgage and perhaps a few varieties of adjustable-rate loans. For a loan to get the "vanilla" label, the lender would have to verify borrowers' income and have them set aside money for property tax and insurance.

Borrowers would still be able to get mortgages that don't pass the government's vanilla test. But they would be warned about the risks.

The Obama administration faces a tough fight over its financial overhaul plan. Powerful trade groups like the American Bankers Association, for example, oppose creating a consumer financial protection agency. Even lobbying groups open to the idea of a consumer-products regulator question whether the government should suggest which mortgages are best for consumers.