It’s been proposed for a while that the Federal government — probably via Fannie and Freddie — pursue some kind of massive bailout of underwater homeowners (some combination of refinancing and perhaps even principal reduction).
But the mechanics and especially politics of this have always been dicey.
Remember, it was a Rick Santelli rant on just this subject that basically started the Tea Party movement. People don’t like bailing out banks, and they don’t like bailing out their neighbours.
But with foreclosure-gate — banks are halting foreclosures left and right due to shoddy or missing paperwork — Obama might have the green light. Rather than pitch the homeowner bailout as a bailout, it would be a mere intervention so that homeowners aren’t under seige from evil bankers.
It’s probably too late for an October Surprise, which is when it was initially speculated we might see this, but as a trick to pull to launch Obama’s 2012 re-election campaign, it would be a good one.