JURIST Contributing Editor Nancy Rapoport of the William S. Boyd School of Law, University of Nevada Las Vegas, says that the housing bailout provisions of the recently announced stimulus package not only do not go far enough to cover mortgage holders in need, but actually reward extreme risk-taking behavior, ironically penalizing homeowners who did the right thing and bought the amount of house that they could afford….

I have a lot of sympathy for those who are caught in the middle of the mortgage crisis — more sympathy that you might realize. And, like many of us, I hope that the stimulus package actually does some good for our economy, although I doubt that there are any clear answers about how to fix an economy that’s gone horribly wrong. (Yes, some of the best minds in the country are working on this problem — both inside and outside the administration; but the best that they can do is make educated guesses about what the best fixes will be.) So far, what we know about the “mortgage fixes” announced Wednesday is that it focuses on two sectors of distressed homeowners: those who are already in default and those who are teetering on the edge of default.

There is, however, a group that has been excluded from every one of the proposed rescues: those homeowners who took out very boring (30-year fixed) mortgages on houses whose values have plummeted. These homeowners sound a lot like the ones about whom Congress and the President are worrying, but there’s a key difference: the excluded group isn’t in danger of default, has not stopped paying its bills (including its mortgages), and will not be rescued by any of the proposals to date.

The news loves to cover those people who took out interest-only mortgages, those who took out adjustable-rate mortgages where the first interest rate jump created a monthly mortgage bill that far exceeded the homeowner’s to pay, or those who bought several houses as investment properties, or my favorite — the NINJA mortgage (given to a borrower with no verifiable income, job, or assets). There’s plenty of blame to go around: banks that may not have disclosed exactly how tricky these mortgage terms were; borrowers who bought much more house than they could afford; rating agencies that bought — hook, line, and sinker — the claim that securities based on risky loans would not carry a significant risk of default.

But what of the banks that required downpayments in the 15-20% range, used conventional, fixed-rate mortgages and 15- to 30-year terms, and verified all of the borrowers’ financial information before agreeing to lend the money? And what of the homeowners who came up with those downpayments, demonstrated their credit-worthiness, and — here is the key — continue to hold jobs that allow them to pay their mortgages each month? Their homes very likely are just as underwater as the homes down the block (the ones with the riskiest mortgages), but no one’s talking about restructuring their mortgages. The discussion of modifying the Bankruptcy Code to allow stripdown of first mortgages in chapter 13 cases won’t apply to this group, which doesn’t plan to file for bankruptcy protection at all.

It’s an interesting group, this forgotten segment. It’s made of people who know that their mortgage payments aren’t going to rebuild equity in their homes any time soon, because the value of their homes is too far gone to allow for equity in the foreseeable future. It’s made of people who see the “for sale” and “foreclosure” signs in their neighborhoods and who have read about “jingle mail” (mailing the keys to the bank and just walking away from their homes entirely).

My guess is that many of the people in this group feel a bit like chumps: they’re honoring their debts, at significant cost, because they are people who pay their debts if they possibly can — even though walking away would be a lot easier. (To be sure, this group is made of people with good credit scores who don’t want to see those scores ruined by a foreclosure or a bankruptcy.)

This group is also key to the country’s stimulus: with jobs and assets, this group can still spend money, which — if you believe the experts — is a good thing to infuse into our economy.

But what one thing can’t this group do? It can’t refinance its homes to take advantage of any new lower interest rates or any new tax breaks. Why? Because this group — like the borrowers with the risky mortgages — has no equity in its homes and, in all likelihood, no ability to find another 15-20% down as part of the refinancing. Take a simple example: my own situation. Eighteen months ago, we bought a house for $380,000 and put approximately 15% down. As of today, our home is worth $267,500, according to Zillow.com, so there’s no more equity in the house. (Our home’s value went down because other homes in our neighborhood are either going unsold or are foreclosed properties.) It’s possible that mortgage rates will go down as a result of the stimulus package, but we won’t be able to take advantage of any refinancing. The proposal itself only targets people whose outstanding mortgage balance doesn’t exceed 105% of the home’s value (for us, that would be $280,875 in home value, with just a hair over $300,000 still owed, so we don’t qualify). Because we’re part of the group not covered by the plan, and because there’s no equity left in the house to give a bank any incentive to give us a new mortgage — and, most important, because we’re not defaulting on any payments — there’s no incentive to bring our bank to the table to restructure our loan. Why should our bank renegotiate? We’re paying our bills, and we have our jobs — we’re just underwater. Congress hasn’t said word one about forcing banks to take care of folks like us, and I doubt that it will (or that it can).

Our group isn’t super-rich (or even moderately rich), so there is a very real cost to us of having lost all of the equity in our homes. From everything I’ve read, our group will be worse off over time than the groups who are getting bailed out. Where’s the bailout for people like us — people who did the right thing and bought the amount of house that they could afford, only to find out that all of the risks that other people took has destroyed the value of their homes, too?

Until the bailout takes care of my group, it’s not really a bailout at all: it’s a reward for extreme risk-taking behavior — behavior that went beyond the bounds of common sense. And what lessons get learned when you reward bad risk-taking behavior? That bad risks are really quite good risks, in the end.

Nancy B. Rapoport is the Gordon & Silver Professor of Law at the William S. Boyd School of Law, University of Nevada, Las Vegas.

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