Well, that is not entirely accurate. Of course the bill has still not been passed, and the details have not been hammered out, but the plan (as I understand it) is for the FHA to purchase the loans from banks (at a discounted rate) and then refinance these loans at a lower interest rate. The proposal however does have non-recoverable costs in the form of buyback of homes already in foreclosure, credit counseling, and millions of dollars in future tax deductions for both homeowners and builders.

Then, they will take on these loans for homes whose market value is rapidly deflating, which means that homeowners will find themselves strapped with a loan much higher than the current market value of their home, and arguably could decide to walk away rather than pay more for less, which means that the homes will still foreclose, but now on the taxpayer's bill.

Truthfully, there are experts on both sides of the fence. Some say the market will correct itself on its own, and in the end home prices will be more equitable (with the deflation of the "housing bubble'). Others say it will be a catch 22, wherein subprime loans have caused a slide in home value, which in turn makes responsible homeowners reassess considering the fact that they now owe more on their mortgages than their house is worth. Even if this is the case, I don't see responsible borrowers walking away from their home, considering that it is a long term investment and I am sure most feel that the home value will go up in a few years.

So, if the market can correct itself, without the government having to foot us with the bill, that would be preferable. Hey, don't we have people on the payroll to figure these things out for us?