The Treasury program of principal forgiveness for underwater homeowners will not have DeMarco participating.  His biggest issue is the fear that a principle forgiveness program might encourage strategic defaults, which could wipe out any benefits the programs would otherwise have.  If the bank forgives, $50,000 in principal on a mortgage, the IRS counts that as income, and you have to pay taxes on it. Less attractive to say the least.  The people this program would help probably would not have $10,000 lying around to pay the taxman regardless. If they did, they wouldn't be in such trouble in the first place.