Sounds like a great option, but lets go one step further. Maybe all of us who have 401K's, should be allowed to pay off our own home loans or any equity loans, without penalties.

Zac,

Your idea might not work as if the folks weren't broke, they wouldn't be behind in the mortgage in the first place.

But, how about making the loans directly to the distressed homeowners? They pay thier mortgages, homes aren't forclosed, homes are not sold at fire-sale prices, housing prices don't drop, mortgage insurance doesn't kick in (& thus takes a load off the insurance industry), the CDO/ CDS are no longer worthless (& thus the banking industry gets a load off their assets)

And to top it off the Govt. always has the tax refunds to aid in repayments.

"Your idea might not work as if the folks weren't broke, they wouldn't be behind in the mortgage in the first place.

But, how about making the loans directly to the distressed homeowners?"

That's exactly what I'm suggesting. Sorry if that wasn't clear. You have the government pay off the loans to the banks at 25 cents on the dollar (or whatever) and then the home owners pay the gov't back over time. If the homes appreciate, Uncle Sam gets a big cut.

IMO, what they should do is extend the term of each variable loan in such a way that the variable adjustment cannot cause an increase in the monthly payment. So, as an example, a 30-year loan might become a 50-year loan for a period of time. If the rate were to decrease, then it might wind down to a 25-year loan.

So, if a homeowner was enticed by a fleet of Harvard lawyers into signing an ill-advised mortgage, his monthly payment could never increase.

Obviously, the homeowner would end up with less equity, but common sense should have told him he could not afford a McMansion in the first place. The mortgage holder would have to wait longer to get money back, but he would be earning market interest rates, and, to be frank, the moron doesn't deserve to get his money back in the normal amount of time as he was the moron who hired the Harvard lawyers to bilk the guy in the first place.

Thanks, but no thanks -- I do not feel like buying a house for anyone today.

The logic of this piece just slays me: "As long as we're rewarding the bad behavior of banks, how's 'bout we reward the bad behavior of would-be homeowners, too? Fair's fair, right?"

Wrong. Nothing in the world fair about those who play by the rules, plan within their means, and read the fine print having to subsidize those who did none of these things. Nothing at all.

And I am sick and tired of being told that every Tom, Dick, and Harry who indulged himself by jumping at a home he should have known he couldn't afford is a "victim" who deserves to be bailed out because the mean bad men MADE him sign on the dotted line.

Horseshit. If you are that lame, you will never manage to pay off that mortgage no matter what taxpayer-funded relief is offered, and the rest of us will get stuck with the bill for your temporary, hijacked possession of the American Dream.

Tough luck. Game over. You lose.

Thanks for playing, and have a nice life -- out of your own wallet.

And who is going to pick up the check when the home owners do not pay the new mortgage...it is about the home owners not being able to afford it...it will come right back to the taxpayer again!!!!!!!

Thanks, but no thanks -- I do not feel like buying a house for anyone today.

The logic of this piece just slays me: "As long as we're rewarding the bad behavior of banks, how's 'bout we reward the bad behavior of would-be homeowners, too? Fair's fair, right?"

Wrong. Nothing in the world fair about those who play by the rules, plan within their means, and read the fine print having to subsidize those who did none of these things. Nothing at all.

And I am sick and tired of being told that every Tom, Dick, and Harry who indulged himself by jumping at a home he should have known he couldn't afford is a "victim" who deserves to be bailed out because the mean bad men MADE him sign on the dotted line.

Horseshit. If you are that lame, you will never manage to pay off that mortgage no matter what taxpayer-funded relief is offered, and the rest of us will get stuck with the bill for your temporary, hijacked possession of the American Dream.

Tough luck. Game over. You lose.

Thanks for playing, and have a nice life -- out of your own wallet.

Easier & simpler than that.

The lenders, who wrote mtgs.. with no credit requirements, unfounded appraisals, with 1 to 2% "suck in rates" for 1 to 3 yrs., then ARM's annually with 2 to 2 1/2 max. rate increases so everybody made big bucks, but he homeowner wasnm't fully aware of what he was faciong -

So - an executive order freezing the rate resulting (or already effected) after the first 2 of those increases - for 3 yrs. - then automatically changed to a 25 or 30 yr. fixed at the going rate.

Also, apply that somehow to those already forclosed by virtue of the lenders unethical actions, still unsold by the lenders,back to the original owner with no penalties.

No Bail-out -- fair tjhose people taken advantage of, let the lenders suffe, not the tax payer, and no financial crisis for our country.

Too logical, isn't it - but what do ther politicians care?

Sad stae we've come to.

Freezing the rate is an undeserved gift to one side, and it would alienate the world's investors for decades.

Adjust the number of years. The only people involved are the buyer and the mortgage holder - both of whom are at fault. No tax dollars are required. There is no foreclosure. Nobody loses their homes. The investors get their higher rate.

I think the banks should adjust all mortgages over 6.75% including ARM's down to 6.75%. This will drasticly reduce the payment therefore making it affordable for those who are not able to make thier payment now. The banks certainly make plenty on the rate and forclosures will drop tremendously. Therefore, there is no need to give a new loan or to sell the mortgage for 25 cents on the dollar.

The cost to the taxpayers will be sustantially higher than 25 cents on the dollar. If 25 cents on the dollar would work, the banks could have already sold them in the private market. I know, I offered 75% of the mortgage value of a foreclosed property to a bank and they laughed at me. This will soak the taxpayers for billions and many years to come.

Good idea, but it won't fly through Congress and across Bush's desk. More to the point, with an unknown liabiloity for $56 TRILLION of credit default swaps, and hopelessly sliced and diced mortgages baked into CDO's and similar opaque financial instruments, why on earth (other than the natural propensity for Republicans to simply throw money at a problem) would we want to shovel $700 Billion into the air and watch it disappear into ne'er-do-wells' pockets?

Clikdawg, You are absolutely right. Many of the now distressed homeowners should never have gotten these loans in the first place.

But they did.

If your neighbor stupidly sets his house on fire, you help put it out, not only from Christian Charity, but because you don't want the fire spreading to your house. That's where we are now. The mortgages on these houses are burning & they've already taken alot of the financial structure with them. Do we let them burn & hope they don't burn anything else? Or do we put the fire out & fix the problem as best we can?

Zac, Okay we've agreed on the rough outline of the solution. You'd buy the defaulting mortgages, I'd lend the homeowners the money to stay current. No real difference. Now, how do we get somebody in authority to listen to us?

Here is the main problem. The people that had real jobs that were "fixing" there numbers to get a house they couldn't afford effected the sub-prime market that was designed for self-employed people who don't show alot of income. In order for me to qualify now I need to prove two years of income and have a 750 fico score. **** I should just go ahead and pay for the damn thing at this rate*** I don't agree on bailing out the greedy banks unless they plan on helping out the taxpayer.

The banks wanted the forclosures! So let em fail!
There plan backfired! I lost my house that i was constructing and never missed a payment. the bank wouldnt extend my loan. So they took my land and everything else i had invested.
The bank sold it $250,000 less then what they loaned me. And collected insurance on the difference. Plus taking me to court! (tried too anyways)

NO BAILOUT! $700 billion can help out the people that can use the help to get back on there feet!

Dan -- Nice try, but the analogy is hardly apt. A.) There is no guarantee (quite the opposite) that buying my neighbor's house for him will "put out the fire" and thus save my own. In fact, a better analogy might be the futility of running blindly into a burning building -- which is precisely what Paulson and Bernanke and yourself are advocating. B.) Throwing good money after bad is just about the worst "bucket" ever invented. C.) Christian charity? You're kidding, right? This has never been a concept applicable to dead-beats. Period. Only a willful and radical perversion of the idea can make it so. D.) To conclude: The structure that is actually aflame in this country is its moral fiber, traditionally considered to consist of the elements of personal responsibility (which includes doing one's homework, looking both ways before crossing, living within one's means, etc.), honor, fair play, and the tangible elevation of the Good Citizen over the Lousy One. All bail-out plans reverse this society-enhancing order, and set a torch to the very structures that have enabled us to climb out of the muck and into some sort of culture that is stable enough to support true exercises of Christian charity.

Stop, already, mit der glorification of those who (in the final analysis) thought they were gonna get somethin' for nothin', and start concentrating on shoring up the sane, stable, and law-abiding segments of our population.

You'll thank yourself in the morning.

Honest.

RS to Dan:

You must surely be aware that there are millions and millions of folks who will never own a home, let alone ask for you and I to loan them the money to buy one even nicer than they could afford.

And you must also be aware that there are innumerable and expensive problems facing this nation besides whether Joe Doaks gets his ass pulled out of the pan. A healthy economy consists of the wise allocation of scarce resources. You fix the highways, the power grids, the health care system, the educational system, and twenty other things I can think of, and THEN come crying to me about bailing these folks out.

And perhaps, at that point, I'll listen with a kindlier ear.

Perhaps.

But not until then.

Savvy?

what if we withdraw from iraq, grab thier assets, bail out homeowners, institute national healthcare, revise irs, take care of america, to hell with big business banks. they made thier bed, let them die in it...

Hello! Bail out the "homeowners." Please, it is the "homeowners" who caused this big mess. We have a whole bunch of people out there who think they are "entitled" to own a home, even though they can't possibly afford one. So what did they do? They scrounged up the $500 down payment for a house (oh boy, what an investment), then borrowed to the max even though they were never qualified to borrow the money and then they placed their "bet" on the value of their house going up, up, up. Guess what, they lost their big bet. Too bad! They got greedy and they lost. The rest of us should not have to bail them out for their greed, stupidity and arrogance. They need to take their lumps. They want us to hand them over a "free" house. Get real. This is not a communist country. We do not use our money to buy someone else a house. What they need to do is give up the flat screen TV, IPOD and ATV and make their mortgage payments. Time to grow up, folks, and be RESPONSIBLE. If you don't know what it means, check out Wikipedia!

rs to maritxu - at one time i did own my home, mortgage paid with my spouses life insurance. i stayed in our home for 19 more years and raised two very responsible daughters. i have never felt "entitled" to own a home. i am not greedy. i sometimes feel stupid for certain decisions i have made that turned out not for the best and while i do not parade about with arrogance, i can certainly conjure some up if need be. when the market was going up, up, up i refinaced based on my equity and continued to raise my children, working full time and not once ever buying a flatscreen tv, my butt has never even sat on a ATV and i probably will not buy an ipod, although my daughters received them as gifts from a boyfriend for one and a close friend for the other. i currently am facing a foreclosure on the home i have been in for 23 years due to being laid-off from my job of 14 years and then my new job of one and a-half years due to gas-prices destroying average America and also taking on the RESPONSIBILITY of caring for my mother who is blind from glaucoma and has short-term memory loss due to iscematic strokes. i am seeking a new job, as are so many in the area i live in due to massive layoffs and while i have experienced major stress from all this and other woes, i feel very fortunate to have lived in my great old house for so long and i always count my blessings and pray for the suffering so many experience in this world. i am sure many people losing their homes are in the situation due to something beyond their control and others probably have been foolish in moneymatters and "bet" poorly. still, COMPASSION is a good attribute to have in ones character. if you don't know what it means, check out Webster's Dictionary.