Kudos to Washington for extending the $8,000 tax credit for first-time homebuyers and for expanding it to provide up to $6,500 in credits to homebuyers moving up into new primary residences. This brings much needed opportunity to many more homebuyers who want to get into the market and helps to provide greater stimulus for our economy. And, while that is great news, there’s still a great need for the government to veer their attention to the growing number of distressed property owners, who are increasingly defaulting on mortgages and simply walking away from their homes.

According to economists and bankers alike, this phenomenon of voluntary or strategic foreclosures—caused by homeowners who simply walk away from properties on which they own more than the home is worth– is likely to pose significant risk to the housing recovery and make price recovery a much slower process than previously thought. In fact Moody’sEconomy.com estimates that the number of underwater borrowers will peak at 17.4 million —or about one fourth of all homeowners with a first mortgage—in the third quarter of 2010. Estimates by Deutsche Bank are even worse!

It stands to reason, the highest rates of defaults are expected in the places where prices plunged the most: Florida and California among them.

Washington, you’ve got one problem down. There’s at least one more to go!

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