The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.
