In reading thus far, I have seen a number of comments about tax revenue implications and about home price implications. What I would see as a consequence, though, is a general reduction in leverage used to purchase housing (regardless of the possible outcomes of the other two). It will be less attractive to be as greatly leveraged and less attractive to carry the debt for so long.

If that reduction in leverage is sufficiently large, it would contract the money supply (probably supporting the outcomes of lower housing prices and lower tax revenue). While I think that less leverage in the housing market is a good thing, the government would certainly be opposed to the deflationary effects that would likely follow. Perhaps this plan is more attractive to them if they can magically lower mortgage interest rates to offset the loss of the MID…