[quote=carlsbadworker]No. It won’t work for Temecula or Escondido (where price has dropped a lot). But it would work for the costly coastal area where price has not dropped a lot (assume the person bought with a downpayment). It is aimed to stop the Alt-A folks to have their payment reset to higher rate, and they would instead be able to lock into 5% 30-years fixed at much lower monthly cost.
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Flaw: assume the person bought with a downpayment
Also, Alt-A folks are voluntarily making the decision to walk b/c they have lost average of 20% equity. They’re not walking necessarily b/c the can’t make the payments. They’re choosing to walk b/c their house is not worth anywhere close to what they paid for it – even in LJ.
