Yesterday, Fannie Mae and Freddie Mac came out with plans to enable borrowers to re-work their mortgages and stay in their homes. The stock market responded by going up .... for about an hour... until analysts had time to actually READ what Fannie and Freddie were REALLY proposing and then the Dow dropped again.
Why ? Because this is nothing more than stretching out and postponing the problem.

In a nutshell, there are no reductions in principal thus locking in the inflated home values to the mortgage. Obviously, there is a hope or expectation that home prices will eventually rebound and return to at least their previous highs.

What they are really doing is behaving, in part, like predatory lenders offering low "teaser rates" i.e. 2 to 3% and stretching out the payments for as long as 30 and even 40 years . But, at the end of these mortgages there will be GIANT balloon payments of unpaid principal. Presumably, the borrowers are supposed to diligently save up for 20 to 40 years so they'll have the requisite funds at the appointed time.

Effectively, homeowners will really be RENTERS which many of them ought to be and always should have been. And which many of them will be when they can't come up with those giant balloon payments. And of course, there will be a wave of foreclosures when those balloon payments are not made.