I don't want direct federal arm-twisting. I suppose Barney the barking dog Frank (he needs to learn to stop interrupting people, to stop shouting, and to stop babbling mindlessly and spouting lib-Dem prattle that's sometimes forty years or more out of date) and Chris Countrywide Dodd will have other ideas, though. And don't forget that there can be indirect forms of this, that penetrate into what could happen naturally, anyway. Namely, the new Congress and Obama administration could change laws regarding mortgage default, foreclosure, uniform bankruptcy laws nationwide including homestead provisions that prohibit foreclosure or eviction, new laws for debt reorganization*, and so on.

There already is an unfortunate non-governmental incentive in the scenario involving homeowners in trouble that is easy to envision. Namely, default on mortgage means foreclosure, eviction and repossession, and resale. Not so fast. It's costly to do all these things, the scummier greedy borrowers have often trashed the homes before leaving (they belong in prison for that — that solves their housing problem [scowl]), and continued falling home prices (which are in order anyway given where they still are) only make the foreclosure-and-resale response financially risky for the lenders. So they may be moved on their own to renegotiate mortgage terms. (Of course, everyone else with a mortgage deserves such renegotiation as well, in fact, more so given their better management of their finances and their lives.)

The key is that this should be _voluntary_, between the lenders and the borrowers, not be forced upon the lenders by the federal (or state or local) government. Of course, the invitation to federal intervention and _compulsory_ revisions to mortgages has been extended insofar as federal money has been given to the lenders, and it confers the ability for the feds (“us”) to demand a set of reforms in exchange for that money. (The real key here, though, is that there shouldn't have been a financial industry bailout. In doing the bailout we've made things worse, with likely more kinds of complications from Washington yet to come.)

* A morally correct way to lower mortgage payments for all, not only those in trouble, would be to exchange lower periodic payments for a longer term, 40-50 years, so that the same amount of principal were still eventually repaid. To actually reduce principal by government is truly theft, and reducing any nominal amount repaid to lenders by government fiat is theft.

Treating everyone, responsible and irresponsible, equally (giving money to all homeowners) is still morally deficient, but superior to the more obvious, disgusting foreclosure-only dream of some Dems.

Better still would be debt relief to all, not limited to home mortgages (which is, in fact, discriminatory and creating a favored class of individuals) but to all debt. Besides, how long will it be before there are cries about the credit card debt Crisis! and a desire to rewrite debt (perhaps forcing down by law interest rates or the “spread” between credit card rates and the federal funds rate)?