I have thrown this out in other forums and get very mixed results.  I need to explain that my opinion is based on the "given" that we are going to spend hundreds of millions of dollars trying to stimulate the economy. I need to make this disclaimer to fend of the "We should not give anyone anything" crowd.

As it stands right now, we are directing this money towards two of the three main groups that need help in this market. The first is obviously the first time home buyer.  I think that we can all agree that this group will help the economy by being active. My problem is, HOW MUCH MORE INCENTIVE DO YOU NEED TO BE A FIRST TIME HOME BUYER? Prices are way down and so are interest rates, what more do you need? While the former $7500 loan and current $8000 credit are great benefits, I'm not sure if these folks wouldn't be active even without them.

The next group to be saved are the many people that for one reason or another are being forced to short sell or be foreclosed on. While it is impossible to paint any situation with a broad brush, many of these loans never should have been written. This is another point where we can get off track playing the blame game. My only point in reference to stimulating the economy is that you are spending money on a group of people that will not be able to enter the market again for five years. I don't want to sound cold and I do understand the need to keep people in their homes, I just think that the criteria for hardship should be a little more strict and that people that entered in to contracts that they never had a chance of paying off should not be allowed to walk away with little or no penalty.

This leads us to the third group of property owners that could really get the ball rolling but are not being addressed within the current stimulus package. This group consists of the people that didn't over extend and settled for smaller homes and condos when the market was at it's height. Again I'm generalizing, but many of these people would like to take advantage of the lower prices to get more house for the same money but need to come to the table with too much money in order to sell their current units. If the government followed through on their original plan to make the first time home buyer credit available to anyone buying a primary residence home, it would lessen the hit make a move more achievable for many responsible home owners. 

By addressing the first time home buyers and the financially able upgraders, banks can start loaning money again making it more palatable to restructure some of the bad loans.  Imagine people buying homes and getting financing while others are modifying their loans to keep from getting foreclosed on and adding to the inventory.  Just a thought.