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Why can't the government simply payoff everyone's mortgage to resolve the housing crisis? 
I think Energy and Mike point out the some serious issues but the prospects for the futures also need to be considered. If the banks no longer have those loans then they need to rebuild their income base that is wiped out by the payoff of their loans.  They would be incentivised to make a large number of loans so that they could quickly reestablish their base so they can maintain profitability.  This is likely to lead to more poor lending practices that lead to this location in the first place.  The high earning heavily leveraged would benefit far more from this than the poor.  A function of income is that as it increases the ability to leverage increases in a non lineal fashion.  So single person making 250k a year(the benchmark set by the current administration) with a 2 million dollar mortgage(probably underwater currently) on a home would benefit much more than a family of 4 making 50k a year with a 100k mortgage.   Assuming that government does pay off all mortages now people can sell of their now fully paid homes for less than their value, as its basically free money, leverage that money to move into a better home, so home values actually crash, in some areas as people sell them off cheap, people try to gamble on cheap houses(like we just saw), etc.  It takes a market that is on the verge of recovery and stabilization and shakes it up.  How long before it stabilizes again would be a matter of debate but I would not expect to see it in less than a decade.  Business and the Economy thrives on stability and retreats from instability.  So while this would appear to be an injection to the economy the chaos it creates would likely actually severely retard future economic growth.