Eric S - I don’t see this as a long-term solution since in a stable market (or slow growth), there is no need. But in a paralyzed market such as this, it seems a good way to restore buyer confidence. Bottom line, at some point someone has to take the loss on a devaluing property. I assume that one unintended consequence would be the increased cost of mortgages as banks pile on service fees for the escrow accounts. But this is really very similar to buying a security AND a put option. If the price goes up, you are out the cost of the put. But if it goes down, you don’t suffer all the loss.

Jason - Was the link to point out that the book was originally $19.95 and is now selling for $0.97? Do you think there is any risk that 30-year fixed 5% loans could become the next frozen asset when rates go up and potential buyers can’t afford monthly payments at the current home prices?

Unrelated note, I think we should start requiring people to write in what their captcha phrase is when they post a comment. They’re really amusing: “loosest Employment”