The initiative, first announced on Feb. 18, would require applicants for loan modifications to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to documents released by the U.S. Treasury in Washington today. The second, larger part of the plan relies on government-run Fannie Mae and Freddie Mac to refinance loans.

There are no surprises here. The details announced today were outlined by President Obama when he announced the rescue effort last month, as The New York Times noted.

A mortgage lender or mortgage-servicing company would first receive cash incentives to modify a borrowers’ loan so that the monthly housing payment declines to no more than 38 percent of the family’s gross monthly income. At that point, the government would match, dollar for dollar, the lender’s cost in reducing the payments as low as 31 percent of monthly income.

The reduced payments could come in the form of a lower interest rate, longer mortgage term or a reduction in the principal outstanding loan amount. The lender would have to make a calculation on whether its cost from reducing the monthly payments, after accounting for the government’s cost-sharing, would be less than the costs it would incur from foreclosing on the house.

The guidelines indicate that a lender would have to make the loan concessions if the subsidized cost of doing so would be lower than the cost of foreclosure. The decision would become voluntary if the estimated costs of the concessions appeared to be higher than the cost of foreclosure.

However, this is new: Bloomberg reports more than 8.3 million Americans were underwater on their mortgages in the fourth quarter of last year — meaning they owed more on their loans than their homes were worth.

That news alone demonstrates why this plan is necessary.

When we pour $10 or 30$ billion into AIG, it doesn’t vanish into thin air. It goes to someone else. Earlier evidence suggested that Goldman Sachs had massive exposure to a potential AIG bankruptcy. And it’s been alleged — though not on any harder evidence than a certain elementary logic — that AIG got saved in part because of people tied to Goldman who were running Bailout Inc. last fall.

Whatever the truth of that, I think it’s time we know more clearly where the $100 or so billion we’ve ‘loaned’ AIG so far went. (There’s been some data on this. But I don’t believe it’s been exhaustive or particularly detailed.) And where’s the next dollop of money likely to go? Whoever these recipients are, they are by definition companies that are in the capitalism business who made a bad bet on AIG, probably a lot of bad bets on AIG.

They don’t seem to be taking the hits, however. Taxpayers are the ones paying for the bad bets.

But let’s just ignore investigating all that and blame the whole thing on irresponsible homeowners instead. It makes for a better viral video.

As I said before the plan came out, the Obama administration should have stepped up and acknowledged right off the bat that some people will get help who don’t deserve it, and that there’s a certain unfairness to the plan. But with foreclosures killing the economy — and all of our home values — there aren’t many alternatives.  That didn’t happen. Instead, as Slate’s John Dickerson notes, White House Press Secretary Robert Gibbs attacked Santelli. That only added to his fame.

The problem is that Santelli and Sullivan are tapping in to something that’s real, a resentment of being forced to pay for someone else’s mistakes. I’ve heard the same sentiments from friends who rented or  remained cramped in smaller houses as their families grew — and now feel they have to pay for people who bought houses bigger than they could afford. The point is not to ridicule those feelings, but to draw the larger picture.

We’ve spent billions of taxpayer dollars to bail out banks that profited from all this, and yet, the resentment toward homeowners in trouble outweighs that anger.  The often egregious, if not outright illegal, lending practices that went on during the boom haven’t always received the attention they deserve. It would help, I think, to fully lay them out: The targeting of minority neighborhoods for high-rate loans. The deregulatory zealots at the Office of Thrift Supervision who sought banks to regulate by offering easier oversight. The use of the government-chartered Federal Home Loan Banks to provide low-cost money to banks like IndyMac Bankcorp to continue  ”unsafe and unsound lending practices,” as one financial analyst put it, even as they teetered on collapse. The meth addicts at Washington Mutual who frantically processed loans as OTS examiners looked the other way.

During the bubble years beginning in 2006, underwriting standards went out the window, and anyone with a pulse got a mortgage, with few or no questions asked. Many of those  Alt-A “liar’s loans” don’t deserve modifications. But banks for years also made  huge profits in subprime  mortgages — the most sophisticated of loan products, sold to the people least likely to understand them. There’s a reason it’s called “predatory lending.” Banks and mortgage firms proved they could make money by bringing in customers who signed up for loan terms they clearly didn’t understand and that trapped them in debt, from prepayment penalties to “exploding” adjustable rate mortgages that increased to unaffordable payments.

When you shopped for a subprime mortgage, you couldn’t just lock in a rate and shop around, a basic tenet for consumers looking for prime loans. It was all risk-based pricing, meaning you had to apply first for the loan, and find out your rate when you were approved. And, of course, the brokers were adding on hidden fees and points as fast as they could. Lenders actually paid brokers extra for bringing in borrowers at higher rates than what they actually qualified for.

All this is to explain that “irresponsible” homeowners is a too-broad term. Yes, some people bought houses beyond their reach or used them as ATMS for vacations and cars. But many others didn’t – they were reaching for the home ownership dream as a responsible path to wealth, and got trapped in loans they didn’t understand and couldn’t afford. The problem with the childish rant of a cable TV talking head is that it can’t grasp the complexity of all this. Neither can any plan to help homeowners, since some of the irresponsible will get help. But banks and lenders profited for a long time by preying on and exploiting many others — and those borrowers do, in fact, deserve  a break.

In Andrew Sullivan’s neighborhood, I somehow doubt that brokers knocked on doors at all hours, attended churches to gain the trust of members and sell them subprime loans, or staked themselves out at community centers to find customers. But that happened all too often in places like Prince George’s County, Md., the nation’s wealthiest majority-black suburb, where housing counselors as early as 2005 complained about a proliferation of subprime loans, and which had almost twice as many  subprime mortgages as the national average.

In Sullivan’s world, there might not be a lot of people who didn’t realize that they could have an attorney at their real estate closing, who didn’t know that it wasn’t standard practice for a broker to come to their office and tell them if they didn’t sign their loan papers right away, they would lose their homes. Some may have understood the interest rate on the loan they were applying for; others may not have. Either way, it didn’t matter, because their broker was assuring them they could refinance out of the loan — the broker they had met at church or in their community, the one they trusted.

The key thing in the Obama plan, and in the idea for national standards for loan modifications, is that you have to verify your income and assets to qualify. In other words, if you lied to get your loan, you won’t get it modified. That takes a lot of unfairness right off the table.

Still, it’s hard for people to swallow the fact that some degree of unfairness will likely be necessary to achieve the greater good of stabilizing the economy — especially when they see a neighbor who blew their home equity on vacations or a nice car getting federal assistance. But it’s what they don’t see that should also trouble them, and that should cause all of us to recognize that irresponsibility in lending didn’t start or end with homeowners alone.

Think about that for a minute. Angulo bought the townhouse, in a working class subdivision in suburban Virginia, for $280,000 in 2005.

Now it’s being offered for a fraction of what Angulo paid for it. He’s out of a home he desperately wanted to stay in. Investors in his loan didn’t exactly come out ahead. No one knows yet how long the home will sit vacant before someone buys it, if anyone ever does. Neighbors who have been paying their mortgages will find their property values taking another hit from this.

Here’s what I can’t figure out: Who really won here? Who benefited from all this?

You could argue Angulo got to live for three years in a house he apparently couldn’t really afford, but that doesn’t take into account the fact that he hoped to stay in it for the long term. Or that he ended up having to go through foreclosure and eviction. He’s back in El Salvador, with a ruined credit rating. The lender, Aurora Loan Services, surely didn’t make much money on this deal – although the firm probably picked up fees for foreclosing and other services, so don’t pull out your hankies just yet.

This is a loan that probably never should have been made to someone who probably didn’t understand what he was getting into. Multiply it by hundreds of thousands of deals just like it and you can understand why we’re in the mess we are right now. What strikes me is that in the end, no one benefited. No one’s better off for what happened – not the former homeowner, the lender, or the neighborhood. Nor are taxpayers who are picking up the tab to clean up messes like this.

What happened, in the end, can’t be summed up with a tidy moral lesson, the hugging and learning moments of television sitcoms. There’s just a sense of purposelessness, of wasted time, wasted emotions, and a churning of money that didn’t create anything of value, although some lenders and Wall Street investors made big profits, for a time. There’s nothing more that comes of this than a glimpse into the way the American Dream of homeownership got twisted and turned upside down in recent years, leaving behind an empty townhouse at a fire-sale price, and a former homeowner broken and gone.