Lots of people are demanding help for people in foreclosure and those owing more than the house value. Before throwing more money at the problem, some effort needs to be expended on looking at who should be helped. Some reporting on the extent of the situation would be of value. For example:
Identify how many of these properties were purchased as second home/income property. Those who did so made investments. Investments go up and investments go down. These went down – just like most 401Ks and IRAs. There is no reason at all why these properties should not be foreclosed on and even less reason why the government (tax money) should bail out the investors.
Identify how many of these properties were the subject of cash out refinances. Those who did this converted their equity in the property for cash in return for higher debt (and probably lower interest rates). Anyone who took out money in this way simply made a bad investment decision.
Identify how many people would be underwater if the money they took in cash refinances were considered as part of the value of the home. These owners have already received that value and not to consider as part of their value is a misrepresentation. Note that a very large percentage of the mortgages prior to the bubble bursting were cash out refinances.
And then there are the people who are claiming that they didn’t know that adjustable mortgages actually, you know, adjust; that balloons came due; or who were sure that they could carry a mortgage payment that was 50% of their gross salary. Stupidity is not a valid defense for anything.
If there is anyone left, we could look at the proper actions to take.