[fabsroman]

The government wouldn't be giving the bad loans to the people that defaulted. The government would be buying these loans from the banks, seeing how they pan out, and then trying to unload them. For most of these loans, I am willing to bet that the home had already been foreclosed on and the previous owner kicked out. In about 9 hours, my wife and I will be looking at a home owned by the bank. The guy bought the place in 2000 for $650K, and the bank is asking $460 for it today. We can actually afford it and it is on a decent piece of land, so I am hoping that the house is at least inhabitable.

Forgot to add that a mortgage payment that equals 40% of income isn't a good idea either. The old lending limit used to be that a monthly mortgage payment could only consist of 28% of the borrowers monthly income before tax. Some people say one third (i.e., 33%), but that is stretching it a bit.