I really do not have an opinion one way or the other with respect to bailing these people out. I think a lot of credit has been extended under a number of  "creative" financings to uncreditworthy people. I am not so certain that the Federal Government's objective is an altruistic bail out, but rather a procedure of forestalling a worse problem with the economy in general.  I think that if there is an intent to bail anyone out it is the real estate industry in general rather than individual home owners.

As I understand what the government is proposing, it is a reduction in foreclosure properties through government backed refis of some of these properties in order to slow the decline in housing prices. I believe the Federal Reserve is trying to head off a major credit crisis in the future also. It has already reduced the rate that banks charge each other over a 30 day period, and expanded the types of securities that are acceptable as collateral (including some of the risky mortgages). There is also an anticipated interest rate reduction next month.

There seems to be a concern that the slumping real estate market will create a recession. There is also the matter of cheap foreclosure properties increasing supply when demand is already weak...further depressing the price of housing. I spoke yesterday with someone that has been trying to unsuccessfully unload a condo for the past year, and has had to reduce the sale price $30,000.00 during that time. I suggested renting the property out until the market improves.

There is also the matter of tightening credit. I read somewhere yesterday (can't remember where) that as many as 85% of the mortgage loan applications that would have been acceptable in recent months were rejected this month.

I really don't know if the Fed's plan is going to work, but right now it seems to be the only game in town. If there are other plans out there...I would love to hear them.

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