Who in their right mind would finance a home with an adjustable rate mortage? I'm economics challenged, but even I know better than to get an adjustable rate loan. Sometimes, folks, you just have to take your lumps when you make bad decisions.
Simplify the process it so there is no complex closing or heavy associated fees; just change the terms.
I know this is possible: I bought our current home in 2000 (got a good deal too, we're nowhere near upside down even with the drop in values), with a 5/30 ARM. As interest rates have declined over the years, our mortgager (HSBC) has voluntarily both lowered the fixed rate and extended the period at which the rate is fixed, twice. We're now in our 9th year with a fixed rate, currently at 4.625%.
They offered this reduction and extension of the fixed period without me even asking, and it took nothing more than signing a letter of acceptance and small one-time processing fee.
Say what you want about ARMs, but this deal has saved us many thousands over the years vs. what we would have been paying had we initially financed with a 30 year fixed in 2000.
Offering this would enable folks who are on the edge but have otherwise been making their payments to continue doing so, but doesn't completely bail them out for property devaluation. I don't believe in rewriting the loans for a new, lower valuation - buying real estate is a gamble and you have to take the good with the bad.
Seems like a workable compromise that will reduce the number of mortgages that go bad, while not really costing anything.