I get tired of most discussions about the housing crisis assuming that EVERY borrower in a pinch these days is by definition irresponsible.

Are you in a pinch? If you can still make your mortgage payments, you're not irresponsible, and therefore not part of the problem. In fact, your situation actually helps, because you can't add your house on an already over saturated market at a low price.

As yetanotherjohn stated, unless you plan on selling your house, it doesn't matter to you if you're underwater or not.

I get tired of most discussions about the housing crisis assuming that EVERY borrower in a pinch these days is by definition irresponsible. Responsible homeowners/borrowers have been hurt by this economy, too. And both the irresponsible borrowers and the irresponsible banks who lent them money are to blame.

What of those of us who put down a substantial down payment and so are not “under water”?

The problem is, that those of you were were responsible are not part of the problem, so helping you doesn't help the problem.

Trying to keep the incapable buyers or the deadbeats (those with the means to pay but choose to walk away) is a losing proposition. They never were buyers in the the normal sense but rather speculators who are simply looking for a way to cut their losses or regain their expected profits. Better to take the immediate price declines of foreclosure to get the properties in the hands of capable, responsible buyers.

In the end, regardless of the bailout foolishness, the false prices will be subsumed by inflation giving property owners the psychological cover that they are ahead when real values will actually be underwater.

I think the idea of splitting the appreciation is to give both sides an incentive in the property. The bank won't maintain the house, the home owner will. So you want to keep the home owner happy.

The more general problem I have is, unless you are planning on selling, who cares if you are underwater on your house. I buy a house to live in. If I am underwater and can continue to make the payments, ok. Not great, but ok.

The issue is the 8% who can't/aren't paying their mortgage. If you have this deal, what percentage would then be able to pay their mortgage?

I can only assume the IRS would be taxing the loan forgiveness as income as well... I'd like to see the look on people's faces when they realize they were just imputed $50,000.00 in income because the government bailed them out.