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Citi's Flip-Flop on Mortgage Cramdowns: A Really Bad Idea

Who are we bailing out here? People who contracted unfavorable terms given their household income and/or people who just hate the fact they bought at the top of the real estate market. Why would they accept these terms?
1) They had never qualified for a home loan before because they either don't have enough income or capital for a down payment and didn't want to miss their once chance to ride the real estate bull.
2) They were buying a second home for investment purposes and likewise hadn't ever qualified for that second home before adjustable rate sub-prime loans became aggressively marketed and they didn't want to miss the chance of leveraging up on that 'can't lose' real estate bull.
3) They qualified fairly but because they bought in 2005, 2006 they are now underwater. They can afford to make payments but see the benefits of walking away and taking a short term bad credit mark on their credit report over accepting a reversal of fortune on paper.
Were all of these people conned? Doubtful. Many likely reasoned that they could always sell later at a higher price if rates got too high.
At what cost to the mortgage market are these cram down terms being adopted?
Absolutely, everyone will pay. People looking to buy homes will face much higher interest rates in any given interest rate environment so as to offset the expense of possible governmental intervention in the future as well.
People already in homes will pay through much slower real estate appreciation going forward. States and municipalities that have grown increasingly dependent on real estate appreciation for property tax revenues.
Who will benefit? Apartment owners.