If principal gets reduced, what about people who busted their ass to pay the debt on their house? Do we get a refund?

Um, it's: Karen Hart, President of Local 925.

Mary Kay Henry is the president of SEIU.

@2 nope.

Technically, the bank should have taken the loss for issuing a bad loan in the first place, but we don't live in a Capitalist society, where the loan originator pays a penalty for making a bad loan, we live in a Feudalistic Mercantilist society, where banks are Too Big To Fail, even though they're mostly owned by investors in the Arab Peninsula.

Being underwater doesn't matter until you try to re-fi or sell. People being foreclosed on, they might need some help. Everyone else, no. Markets are risky, prior history is no guarantee of future performance, etc.

I'm not sure I understand the plan.

Off the top of my (caffeine addled) head, here's what I'd like to see: Allow one-time restructuring of mortgages where the monthly payment reflects the current market value of their homes, but stretches the loan out to where they cover their entire original debt. (but can't legally extend beyond 30-years, so only folks with a fair amount of equity in their homes will qualify, which I'm not saying as some sort of punishment, but it's the only way the numbers work.)

It'd be a bit like a refi, but rates could still hover slightly above prime, and would be strictly regulated.

It's not the only solution, but it's a good emergency program that I think all sides should be able to agree on and would keep a hell of a lot of seniors in their homes.

Very insightful, @6.

People sometimes incorrectly sell assets (stocks, homes, boats) because their purported market value is "underwater". This is almost always a bad idea, as virtually all markets go in cycles.

Which I can demonstrate by the intrinsic book value of such things as Edsels, AOL discs, MP3 players, watches, paintings by really dead people, and old computers with 8000 bytes of RAM.

OK, so that didn't help. If you live in an area where the population is declining (anywhere that water will become scarcer, energy is expensive, and services difficult to obtain), than keeping the home is a bad idea - you should just walk away from it like Trump does or GE does when they let the taxpayers pay for their debts. If you live in an area going through a minor downturn but where the asset will appreciate in value long term (e.g. Seattle homes), then selling out when the market falls is usually a bad idea.

Homes used to cost a multiple of five (5) times annual salary. If your home is "worth" more than that, it may be overpriced.

@8 Why not leave the monthly payment as originally agreed? Why should the change of value of your collateral change the terms of your debt obligation?

@10 I'm arguing for a program that would assist those looking at homelessness, not a new refi product anyone can get because they want one. I'm not talking about the dude that leveraged his house to buy a boat, that was a calculated risk on his part.

I think working with the banks into restructuring a mortgage (not forgiving their debt) for those elderly citizens facing foreclosure and homelessness is the path of least resistance financially and morally—as if there were a "morality" check box on the Subsequent Transfer Agreement, but it's fun to say to make a point.

Remember, making home equity extraction easier was one of the Bush administrations programs to grow the economy; the dude even came on TV urging cash-strapped folks to go ahead and take advantage of the rising real estate markets. Bad, bad, bad, bad advice for 95% of everyone, ever.

Strangely, people behave differently when they think they have wealth (home equity), than when they think they don't (underwater).

Even though it's the same house and the same payments.

#12 has to be a barista/apodment dweller to say that it's "strange" for people to think differently about making payments on an underwater mortgage relative to one that's solvent.

The problem is that these loans were predatory; they sought out people with credit problems or other reasons for having trouble getting affordable loans, and sold them mortgages that screwed them over, knowing perfectly well that eventually the thing would collapse -- but then the lender would be able to foreclose and take the home, and in the meantime the payments -- often interest-only -- would be pure gravy. Only the poor would suffer.

This is just the latest maneuver in a history of rich white speculators sucking money out of the poor, who have always been barred from more reasonable forms of credit that we take for granted.

1. Get rid of GMA
2. If you want to build apodments, build them for seniors.
3. But charge $250 a month not $2250.

@16 - What if it was the only option presented and everyone from your realtor to the bank making the low is screaming at you to buy now because of how fast houses are appreciating?

Banks are the ones whose job is to manage risk. Why should the homeowner suffer because the bank offered them an unstable, risky product - often one completely in the bank's favor? The banks process thousands of loans. How many times does the average American get a loan? Who is the expert in the transaction? I don't get why the trolls are implying it is solely the homeowner's responsibility to be the experts in these transactions.

Finally, the banks already got cookies via the socialist bailout, while having been found to have acted illegally multiple times. And yet the expectation is only the homeowner is expected to play fair when in many cases the game was illegally rigged.

If you want cookies, get them from the banks and be happy you're keeping people in their homes. Even with principal reduction, the banks are still coming out ahead in the long run.

Those who paid and did not get underwater benefit here by not having seniors sleeping in cars out front of their houses and crapping on their lawn and by not having to deal with their corpses should the night air finish them off.

Yep, the banks forced people at gunpoint to get those mortgages.