Randy - I assume your "people who are irresponbsible should not be rewarded" statement applies to the banks as well! THEY were the ones who started the irresponsibility bandwagon moving and then encouraged everyone to get on board! If we are going to punish irresponsible homeowners, then we must do the same to banks and I think your idea is a TERRIFIC one!
Personally, I think we should declare a two year moratorium on foreclosures, then take the foreclosure, shortsale, loan modification business out of the hands of the banks. They have proven they are completely incompetent and unequipped to handle these anyway. Let's force them to outsource the problem to people who know how to get these things done, perhaps hire realtors as consultants! And let's look at these loans one at a time. Modify where appropriate, short sell where appropriate and foreclose as a last resort.
The moratorium alone will stimulate the housing market, which will stimulate the economy, which will lead to more jobs and by the time we evaluate the last distressed loan we may not HAVE to foreclose!