A government watchdog panel said Friday that while the Obama administration’s $75 billion housing initiative is a move in the right direction, it still falls short in its effort to quell the expanding foreclosure crisis.

The Congressional Oversight Panel said the plan would do little to help homeowners who owe more on their mortgages than their homes are currently worth, a condition known as being “underwater.” Those homeowners are some of the prime candidates for foreclosure.

“The Obama plan is good and it has some very clever parts to it, but it’s narrowly constrained in its application to the mortgages that are not in excess of the value of the home,” Harvard Law Professor Elizabeth Warren, the chairwoman of the panel, told reporters Friday morning. “We think that this creates a problem at multiple levels.”

The administration plan, considered more aggressive than most were predicting, would bring together a number of financial regulators and the federally run mortgage giants Fannie Mae and Freddie Mac to deploy a $75 billion, three-pronged approach aimed at helping at-risk homeowners, those facing foreclosure and even those who have already gone through foreclosure.

The plan would allow up to 5 million individuals to refinance their mortgages through Fannie Mae and Freddie Mac. It would help an estimated 3 million to 4 million homeowners modify their current loans to a more affordable monthly payment level. The goal is to bring down mortgage interest rates overall by allowing Fannie and Freddie to increase their mortgage portfolio holdings.

But while the plan allows homeowners with market home values up to 5 percent higher than the amount of equity in their homes to participate, it excludes homeowners who find themselves under a significant amount of water.

The plan, Warren said, “offers incentives to rework payment plans and to renegotiate mortgages that are not underwater. But there is a hard truth lying out there: There are millions of mortgages that are underwater and they are not all worth their face values.”

The oversight panel was created under the $700 billion bank bailout law enacted last year.