Chris and Candice Basso would like to move up to a larger home this spring, taking advantage of a federal tax credit worth up to $6,500 for repeat home buyers.http://www.usatoday.com/money/economy/housing/2010-02-10-moveup10_CV_N.htm
But even a big tax credit won't be enough to lift them into a bigger, better home.
The Centreville, Va., couple are trapped in a two-bedroom townhouse that's worth less than their unpaid mortgage. They face the same predicament with a condo that they own and rent out. Unable to sell either property for what they owe and with their equity wiped out, a new mortgage is out of the question.
They gave the bail out money to the banks, and trusted the banks to help out upside down homeowners. Of course, they didn't.
If they had given grants directly to upside down homeowners, in the amount by which they were underwater, payable directly to the lenders on the homeowners' behalf, in reduction of the home mortgages, both banks and homeowners would have been bailed out, and consumers would be spending again.
That was the dumbest move so far. (The second dumbest was giving all the "cash for clunkers" money to Japanese and Korean automakers, and not requiring recipients to "Buy American".)