I 110% agree Carl.  While it seems good in the short-term it will only complicate the market even more and make it more difficult for people to own more than one property.

Not sure which Jeff you are talking about, but the vast majority of the people whose houses are ending up in foreclosure are never even contacting their lender to try to work something out. In fact, they are actively avoiding the calls and letters when their lender tries to contact them. In addition, this is talking about people who aren't even late on their payments yet, but are using fake leases to cover the debt payment long enough to buy a new house - knowing all the time that they intend to walk away from the old one. Often the new loan officer is perfectly aware of what is going on and is hiding this fact from the new lender.

In these situations, both the old lender and the borrower made mistakes even if the mistakes were unintentional. Unfortunately, people should still have to pay the price for making even unintentional mistakes. The price for making a mistake that results in your home being foreclosed is that you aren't eligible to get a new mortgage until you have waited the appropriate time and rebuilt your credit. This person needs to rent until they've paid the price.

I don't want to get too preachy, but everyone these days seems to think they shouldn't have to pay the price for mistakes they make in life. That trend explains in a nutshell a lot of the problems our country is having today. Would many of the mortgage programs offered or underwriting decisions made over the past few years have developed the way they did if the Wall Street firms hadn't felt that someone would bail them out if things went wrong? This applies all through the process.

So to answer your question, I'm going to tell the lady I can't help her with a mortgage because its unethical and/or illegal. I'm going to tell her that she and her family need to find a good rental and wait for 3 years while prices fall. Far too often in the mortgage broker forums I "hear" people who want to be considered "professionals" and "mortgage advisors" cop out and declare they aren't the borrower's parent or it isn't up to them to make the borrower's decision for them. But it is up to them to decide whether they want to be an ethical human being or whether they are just in it for a quick buck - in which case they need to acknowledge that and quit whining when people don't respect them.

Boo hoo hoo, evil buyers are underwater by 250k+ and they're drwoning while everyone else gets a bail out. What do greedy realtors and mortgage brokers claim-oh boo hoo, they might infringe upon our sales and future!

Grow up you greedy bastages. You happily sold these people houses with joke loans and ridiclous valuations knowing full well what was going to hapen. Now that it has you simply want people to suck it up. You people are a joke. No wonder the Real Estate profession is full of bloodthirsty leaches--6% for what!!@@?

Eventually we will rid ourselves of you!

BUY AND FLY BABY!!!!!!!!!!!

Very well put Buyin and a flyin, and a perfect way to end this post. You said what all us buyer feel perfectly !  Why is the hell should be pay for the greed and incompetence of the mortgage and lending industry's????  Very good question 6% for what, a few hours work and a tank of gas and they make a killing.

In my opinion you need to look at this as a business decision.  If you bought a bad stock you cut your lost, and move on.  You can take your chances on it coming back but you may also loose even more.

A purchase of real estate is not any different.  You cut your lost and move on if it is a bad investment.  Keep in mind it isn't a legal or moral decision it's a business decision. Like all business decisions you make when cutting your lost there is no perfect choice.

Do a google search for this article, "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis" by Brent T. White. To get a different point of view from that of real estate and lending.