[thackney]

So do you want the banks to, contrary to their own self-interest, foreclose upon those houses?

I want the banks and the borrows to work it out without using tax dollars or credits. If it is truly contrary to the banks self-interest to foreclose, why should we worry about them foreclosing?

[durasell]

Because the banks packaged the debt in bundles and sold them off to other entities, such as hedge funds. The hedge funds et al in turn used them as collatarol for loans from banks. When the value of the bonds drops far enough, the holders will try to get some of their money bank by holding a fire sale that will drop real estate prices in every area where the loans were made...

[jude24]

It's my understanding that no Treasury dollars will be involved. The Treasury is involved only to facilitate the agreement among the banks. This is a private-sector solution which has only been facilitated by the Treasury. (See here.)

[DB]

A good number of these loans are Freddy Mac and Fanny Mae based. Many regulations... To alter the contractual terms of a loan made through these organizations may require government approval.