I took this from a post on the Washington Monthly blog:http://www.washingtonmonthly.com/archives/individual/2009_02/016992.php
and I thought this cleared up some misconceptions about the housing bill.
Obama's plan is not primarily aimed at people who acted irresponsibly. Recall that it has three main parts:
(1) It rewrites regulations to allow people whose mortgages are with Fannie Mae and Freddie Mac, and who owe 80-105% of the value of their home, to refinance. These are not necessarily people who are in trouble; the value of everyone's home is going down, and it's easy for someone who got a prudent mortgage with a good chunk of money down to find him- or herself in this category. In fact, people who really borrowed more than they could afford will, in many parts of the country, be too far underwater to take advantage of this provision.
Moreover, this costs the taxpayer virtually nothing. President Obama: "The estimated cost to taxpayers would be roughly zero. While Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures."
(2) The loan modification program. This costs taxpayers $75 billion, which will be used to provide incentives to banks and mortgage servicers to modify at-risk loans. This program does not require that the borrower be in default, or late making payments. People who are in trouble, but who have managed to stay current with their payments, are not left out in favor of people who are facing foreclosure.
It does, however, exclude people who will not commit to staying in their home -- e.g., speculators and flippers.
(3) Increasing funding for Fannie Mae and Freddie Mac, and purchases of their mortgage securities. The purpose of this is to keep the mortgage market liquid. This step will lower mortgage rates, which will help new home buyers and people who refinance. But it does nothing (directly, at least) for people who took out mortgages they cannot afford.
The second of these steps is the only one that could possibly be said to help people who took out loans they cannot afford at the expense of the rest of us. (The first and third are aimed at different problems entirely.) You don't have to be in default, or late making payments, in order to qualify for it. You do, however, have to be paying more than you can realistically afford
Note bold text is my emphasis