Hmmm. I need to think about this. Aren't you assuming that the "floor" of $200k is indeed the proper price for that house? How does the government know that this particular house isn't overpriced by just 10%? If the government buys out that mortgage at 50%, isn't it just giving away a huge pot o' cash? Sounds like a huge fraud potential to me. Also, what if the market will really only support $125k houses in that particular neighborhood (because that's all those people can afford when you throw out the financing games that got us into this mess)? Won't the settling price at $200k still be too rich for many people's blood? Wouldn't we be better off letting the actual market set the price for the real value of the home? Sorry if I'm being thick here.
Seems to me the price would be set by the market. The banks would put up the houses for sale and we'd find out what the sales price is based upon what people are willing to pay. Adjust bailout and buydown figures accordingly. The whole point is to create a stable priced market for houses and let things grow from there.
