Say some subprime borrower lives in a $400k house in one of the big metro areas. Getting gov’t assistance in recasting their abusive mortgage into a fixed rate mortgage isn’t going to make up for the fact that the declining market in that area is going to lower the amount that can be financed, regardless of terms.

Actually, it might help support these insane prices. So while the responsible buyers are waiting to build up a down payment and have income to support the loan, they are having to bail out the irresponsible who have overextended and bought into inflated housing. Just doesn’t seem right.