The answer seems to be "not much" yet.

In the case of a homeowner who has a mortgage that was not subprime, and who dealt with a local bank that did not sell his loan, he has a good chance of being able to do a mortgage modification with that bank. Bear in mind though, banks hate to loose money and while his (or your) overriding and immediate concern is to arrange a payment that he can afford, the piper has to be paid. This means that he has to pay attention to all the terms of the new agreement and take into consideration the new total cost of owning the house.

If the mortgage was a subprime that was not broken up, repackaged and sold in bits and pieces to various investors - which, if it had been broken up, would have made it difficult to find who the owner is, then there is an FHA rescue refinance program where lenders could write down qualified mortgages to 85% of the current appraised value of the property. The qualified borrower would then get a new FHA 30yr fixed mortgage for 90% of the current appraised value of the property.

There are provisos - first the bank has to agree to take a loss (the government cannot force them to), secondly, the borrower would have to agree to give the FHA 1/2 of all future appreciation when he sells the house. The loan limit here is $550,440.

The homeowner here may find having to give up 50% of all future appreciation(not gain), even if he holds the house for 25yrs, a hard nut to swallow.

Why is the government not really bailing out distressed homeowners? While it seems to be mulling over this possibility, there are strong conditions that work against an across the board programme.

One primary reason, is that with the most difficult of the mortgages - those that were subprime and adjustable, broken up into bits and pieces, repackaged and sold to many different private investors worldwide, it is nearly impossible to figure out who owns which loan in its entirety. This makes it difficult to create a programme that satisfies the homeowner and all the various competing private stakeholders who are extremely resistant to loosing any of their profit potential.

Those mortgages- either conventional or subprime, that don't fall into this nightmare category also present difficulty, because each is different and comes with its own conditions. This lack of standardization means that a different programme has to be devised and managed for every mortgage - an unbelievably impossible situation. This situation is futher complicated by the fact that many of these loans were also broken up and sold to private investors.

Also, both the Federal Government and the Banks worry that a bailout programme can encourage more defaults as homeowners, seeing their neighbors benefit from write-downs and/or lower rates, default in effort try to negotiate the same benefit for themselves.

Further, banks are concerned that it may take major givebacks - incurring substantial losses, before any programme can work. This worry is supported by experience that small modifications have only limited success. Credit Suisse data shows that one third of all subprime loans modified in the third quarter of '07 were deliquent again in 10 mths.

To all these considerations are added increasing defaults created by homeowners loosing jobs or choosing to walk away because their homes are worth considerably less than they owe. Banks would not be interested in lending to homeowners under these circumstances.

Additionally the questions of who can be, and who is really deserving of being bailed out must be asked. What standards and criteria must be set? Is the investor on the same footing as the individual homeowner? Is the individual homeowner who scammed his way into a mortgage deserving of the same consideration? Questions further arise as to whether anyone wants those major greedy investors, whose unbridled avarice caused this problem, to benefit from a bailout of homeowners, and how to benefit homeowners while excluding these investors.

Given all the complicating circumstances and myriad considerations, it is small wonder that there is no universal programme to help defaulting homeowners.

At this time, the best option for a homeowner about to default, if he cannot get the bank to modify his mortgage to something he can afford, would be to do a Short Sale so that he can save his credit and walk away owing nothing. This is a decision best made early.