These guys have no idea what the magnitude of the problem they’re contemplating stepping into, or how much it will cost the taxpayer to bail these people out. The threat to these borrowers is not limited to the terms of their loans; a lot of these properties are located in overextended markets. The price corrections are doing more damage to these people than the terms of these loans. If the values were still increasing these borrowers could solve their own problems by refinancing or selling.
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. If that borrower could have borrowed the full amount under conventional terms they would have done so in the first place. The whole reason these borrowers went subprime is because they either lack the income or the ability to manage their income well enough to do that.
Even if we could afford it (we can’t), government assistance can’t transform a subprime borrower’s personal characteristics and it can’t prop up the values in an overextended market. All it can do is make the situation worse for everyone concerned, which will be…everyone.