The Government should consider a program where home owners, current on their home mortgages, but under water on their loan to value could get an interest rate reduction to 1% or lower until such time their home loan is at least equal to the market value of their home. Over time as they continue to make payments, more money will be going to principal and reduce the gap between what is owed and the value of their property. Furthermore, this would maintain property values and increase federal tax collection
We already just give money to banks, what would be wrong with the government covering the difference on the interest rate until the value and debt are equal. They could finance this program by eliminating the home mortgage deduction for the participating home owners.