A hand out or a hand up?

More importantly Rona, I don't think it will make a difference. Jumping out of a 50 story building rather than a 30 story building might take you longer to hit the ground, but its still going to be there in the end.

If someone can't afford there house now, in an economy where things are getting worse, how will they be better in a few months?

I agree with #1. Fairness does not end the analysis. Will it help (1) the housing market and (2) the economy? I doubt that "help keep owners in the single family homes they live in" will help things. It will prolong the crisis. Because the economy does not care who lives in a particular home. It cares about the volume of deals, the movement, the dynamic market. It does not like the static status quo. And keeping owners in their houses is exactly what this whole concept of "help" means. The static situation with little movement. The prices need to drop to affordable levels for new buyers, instead of mortgages being made "affordable" for the existing owners. As for fairness. - No it is not fair on so many levels.

The perception of fairness also matters.

If some people are helped (even if only partially), the others may feel cheated, be less motivated to make payments, or to make the sacrifices needed to make payments. Rewarding debtors for defaulting - or the perception of rewarding defaulters - isn't a good foundation for restoring trust to the credit system.

Fairness is playing by a fixed set of rules and not changing the rules after somebody makes irrational decisions and loses out on their risks. Some folks have cried out "socialism" to the recent and proposed bailouts (in all forms), but it's worse than socialism in my opinion. At least with socialism you know what the rules are and can adjust your decisions accordingly under the system; with the bailouts those who behaved rationally through the bubble end up covering those who lost out on their bets. Moreover, the press should start using the term "highest bidder" instead of "homeowner" bailouts when it comes to aiding people facing foreclosure. For every "homeowner" facing foreclosure there are probably dozens of others who would have bought the house at a lower, more realistic price at the time (and not be facing foreclosure), but instead are still renting because of the overinflated housing market due to the people offering more than houses are actually worth.

This is a clever political move . Welcome to the real world Obama. Instead of the foreclosures being perceived as Bush's last act , they will be Obama's first act .

Is it fair for lenders to take assertive action from a damage control perspective? Take a loss of 10% versus up to 50% if a property goes to foreclosure. I saw a recent example of this where the lender apparently was willing to allow a short sale, and the homeowner listed the property at a fair-market price - below what the house had sold for in 2004. It went under contract in 15 days, and closed in 10 weeks - $24,000 (or about 10%), less than the previous sale price. Granted this was an attractive home in a popular city neighborhood. I'd argue that there was fairness for all parties, and that losses were minimized.

"Fairness is equity: Everyone gets their equal share. All get equal part of the pie …"

Lets be fair and call this what it is Rona, Communism.

"People who are shut out of the housing market are mad, so are those who got in over their heads. Anyone who makes median income should be able to buy a house, but they can't...It’s not fair! "

I am neither shut out of the housing market nor am I in over my head and I am still mad and it isn't fair.

I think keeping everything artifiicallty inflated is just ripping the band-aid off very slowly. It will still come off it will just be long and painful.

I am very upset about bailing out people who got over their heads. People should be accountable for their actions. Those who live within their means and try to do what is right get punished. What kind of message does that convey??? Completely wrong, completely unfair! Noone takes responsibilty for anything these days.

I like what Jim is saying however I would still make the homeowner responsible for repaying the remainder of the loan. Why should the bank have to take the hit for a homeowner's poor decision. We do not make the brokerage take a hit when we by stocks that go south nor do we look to the government for relief. Its not about fairness its about making responsible decisions and living within our means. What's not fair is making people who made responsible decisions suffer because of those who made bad decisions.

"Fairness is playing by a fixed set of rules." That's the best definition around. Bailouts worse than socialism? I think so too. If homeowner bailouts were with "free" money it would be bad enough, but that money is coming from neighbors' wallets in the form of taxes. Take from the prudent with tiny houses to prop up the reckless in their mcmansions, that's not just "socialism" or "unfairness," that's stealing.

Some of you are making assumptions about what this program is and what it does. This is a freeze on foreclosure. Not a halt to it. If these delinquent homeowners can't refinance into something they can pay for, they will be out of their homes in March or April. The terms are not yet set, but they don’t include paying anyone's equity. The mortgages may be dragged out to 40 years, the rate may be reduced back to normal levels, and/or the debt balance may be reduced now and tacked on the end of the loan. Look at the link. The program is in the middle of page.

Rona - as a new homebuyer with a few defaults on my credit report can I go to the bank and get a new "something I can pay for" for 40 years?

George has a good point. A lender authorizing a short sale can enter into an agreement with the borrower to repay the balance of the loan over a period of time. My understanding is this approach has less of an impact on the borrower's credit rating. I think it is in everyone's best interest to mitigate damage as fast and as cost-effectively as lenders and borrowers can do. A combination of price corrections, reduced production levels of new homes, and the rapid clearing of inventory - be it short sales, deed-in-lieu of foreclosure, or foreclosures - will bring the housing market back in balance. As Charles has pointed out correctly, the cost of housing has to have its' basis in available income. If I expect a buyer for my property to pay 4x income to repay their loan, I better hope my home appeals to a cash buyer.

Alex (and anyone else who is having problems paying the mortgage,)
The details are not yet out about this program. It looks like it's for people in more hot water than you are. You should check with local lenders to see if you can refinance now. Also, contact an office near you where you can get detailed advice.

Fair is not changing the rules middle of the road. I am sorry if people got in over their head but that was their decision. And I am mad because their poor decisions affect me and not just them. They damage so many other people that are stuck because they cannot sell. I am fully aware of the role of the market place but because of the irresponsibility of these homeowners I am stuck with a place that I can afford but want to sell but cannot. I bought in at the crazy prices but I could afford it because I made sacrifices to buy at the prices that they were at the time. Now that I want a new home to accommodate my growing family I cannot because I cannot sell my place. And there is no chance I would rent in MA where the landlord is always the bad guy.

Their lack of responsibilty is affecting more than just them and the constant talk of bailout is not going to teach them anything. They will recover and then go on and do the same or similar things, run up debt and then cry that they can't pay and it is someone else's fault. They may be renting at that point but they will have the best clothes and large flat screen because they could buy it on credit. These owners need to feel the pain of their irresponsibility, and learn just because you "can" do something doesn't mean you should. And just because someone offers to loan you money via a mortgage or credit cards doesn't mean you could use it.

Was it fair to allow the Fugitive Slave Laws to be passed because slaveowners of slaves would lose money if they did not get their slaves back?

There is a difference in sanctity of contract based upon profit and that based upon consumer protection.

Foreclosure makes a mockery of consumer protection when commerce is able to induce consumers to enter disparately disadvantageous deals that can result in their being thrown out of homes, or becoming homeless. It is not as if commerce could not avail themselves of traditional credit guidelines that operate to prevent high risk loans. All of those financial features were available to lenders who chose to ignore them and make oppressive profits by allowing vulnerable homeowners to enter abusive contracts. This is very similar to, if not actual consumer fraud. In being bailed out, banks are already getting more than they deserve by being rewarded for the bad loans they chose to make. No one forced them to make those loans.

The sanctity of contract works for commerce to prevent commercial equals from stealing from each other. It is not a license to turn around and steal from consumers. This is why usury laws were invented. Ignoring them simply places the banks in a position where they were able to ignore their own time tested practices for safe business.

In the 1880's, no one could be thrown out of their home, regardless of whether they willingly signed a contract. America needs to return to that practice, and refuse to harm families in order to provide banks with profits. People safety over profits is the very essence of consumer safety laws. It isn't a matter of who wins, because everyone wins.

If there are no abusive contracts, there are no defaults.
If there are no wars, there are no soldiers killed.

America belongs to citizens, not to banks.