Seeking Clarification

Recently I learned that part of Obama’s new bailout policies are to write off people’s mortgages to bring the price of their homes to the current market value.  This way people aren’t paying mortgages that they will never be able to recover.  Now a person I know has been in some trouble, and she learned that the bank might write off one of her mortgages “as part of Obama’s new policies.”  This will make her house affordable because the house they bought has lost too much value since she purchased her home a few years ago.   Never mind the fact that it was too expensive when she bought it.

Well, my husband and I also bought our first home recently.  It is a modest-sized townhome which we knew we could afford on one salary as I am currently staying home with our children.  Our kids are not in expensive preschools, we don’t take expensive family vacations, we don’t eat in expensive restaurants, I purchase clothes in consignment sales or off of clearance racks, and we don’t have cable tv.  This is because we are making the best decisions we can right now.  We live on one salary, and we are trying to put money away for the kids’ college expenses and our retirement.  I think we are doing ok.  We work hard to provide for our children, and we have a pretty good life right now.  We have made sacrifices in our budget to enable us to live within our means.

However, when I see people who do not make the same decisions as I do who are in line to have their mortgages written off, I get a little frustrated.  Our home has also lost value since we bought it, but we are not going to be given a check for the down payment we have lost even though we made sure we could  we make our mortgage every month before we bought the house.

I have two other questions.  One is that if you buy off people’s mortgages, do you not make everyone else’s house worth less money in your effort to keep some people in their homes (while raising taxes on everyone else who is already working hard to stay within their budgets)?  My other question is when the housing market picks back up again, what happens with the profits people make on their homes?  Let’s say you write off 100 grand in someone’s mortgage today so they can keep their family in their home.  In 10 years, when their house price is back up and they go to sell their home, to whom does the profit belong?  Does it go back to the government or to the people who benefited from the bailouts get it?