People have been defaulting on mortgages for all of recorded history. In Roman times, such a default could well result in the mortgage-holder getting sold into slavery, so things have improved a bit. But seriously, people default on their mortgages all the time. So what makes those currently in default more deserving of taxpayer aid than those before them or after them? I mean, other than the fact that the press is paying attention to these particular defaults? A similar question was reasonably asked of 9/11 victims who scored government compensation when victims before or after of other transportation accidents and building fires have not been so rewarded.
I challenge any politician to answer this question with an answer other than "well, these people are in the media spotlight right now and as a politician, I want to be in the spotlight with them."
Update: More analysis here, including the bright side of the burst housing bubble:
Countrywide wants to be
able to take its loans that the market won't accept and refi them under
FHA or FNMA. That's what this is all about. Don't forget that.
not about homeownership. Let's look at the latest 25th percentile
(starter homes) list prices for a range of CA cities, compared to the
price in January 2007:
LA: $365,000/ $429,920
OC: $414,900/ $499,000
Riverside: $259,900/ $335,000
Sacramento: $229,900/ $316,477
San Diego: $325,000/ $392,279
San Francisco: $380,000/ $468,376
San Jose: $489,950/ $580,589
Santa Cruz: $489,000/ $577,400
you see above is great news for all the people who would like to buy
homes without going bankrupt a few years down the line. It's VERY bad
news for banks and financial companies that made the original bad loans
without bothering to check whether the borrowers could pay the danged
loan. You figure out who this country should reward - responsible
aspiring home owners or stupid banks.