David Leonhardt writes in the NY Times:
In a speech in Phoenix [on Wednesday], a signature real estate boomtown gone bust, President Obama will explain his plan to reduce foreclosures. And the key to understanding that plan will be remembering that there are two different groups of homeowners who are at risk of foreclosure.
The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households â€” and rising â€” fall into this category. Without help, they will lose their homes.
The second group is far larger. It is made up of the more than 10 million households that can afford their monthly payments but whose houses are worth less than what is owed on their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continue to make payments on an investment that may never pay off.
Scratch beneath the details of any housing bailout proposal, and the fundamental issue is whether it tries to help the second group or just the first.
Mr. Obama has evidently decided to focus on the first group, based on the previews of his speech that aides have offered.
So, let me see if I have this straight? Obama is going to throw money at the most hopeless cases, the people who never should have bought the house in the first place, many of whom are speculators and/or crooks who lied on their mortgage applications, but he won`t help out the larger number of people who are doing the right thing?
And it`s really not that hard to turn yourself into a hopeless case, especially if the government will pay you for doing so.
Further, a lot of deadbeats and potential deadbeats who look like hopeless cases based on their own individual incomes and assets have this thing called "relatives." Over the last couple of decades, I`ve twice written moderately sizable checks to get relatives through credit crunches. It`s just what you do.