Not a bad deal for those of us smart enough to get out of our long positions in real estate before the summer of 2005.
But I agree with you about the Unconstitutionality (and moral evil) of government-imposed reductions in mortgage balances (or interest rates) after the fact.
Unless its a nationalized bank that doesn't care! That won't help the pace of recovery, either.
“If these guys succeed in using the state to interfere with private contract (violating the US Constitution that nobody bothers to read anymore) only the best credit risk will get loans and the housing market will be flat for decades.”
To what part of the Constitution are you referring?
Article 1, Sect 10 which covers contracts specifies States, not the Feds. That is why all bankruptcy courts are Federal and so the Federal bankruptcy courts, the Treasury or anything else that is not a state institution is not bound by Article 1, Sect 10 of the Constitution.
Further, the Supreme court ruled in 1934 that the federal bankruptcy courts could get involved in mortgage contracts in Home Building & Loan Association v. Blaisdell 290 U.S. 398 (1934). The courts went further in 1983 and said during an economic crisis, the bankruptcy courts can do basically whatever the hell they want in Energy Reserves Group v. Kansas Power & Light 459 U.S. 400 (1983).
Though I agree that this would fry the housing market and trying to purchase a home would have draconian requirements, intereference with contracts by anything Federal would not be unconstitutional.