Matthew, I'd like to find a way for folks who are upside down in value be able to refinance their adjustable and subprime 1st mortgages and avoid the large payment increases that are putting them out on the street. 

Most of the problems are cause by the 1st loans, not the 2nd's that were piggybacked behind those 1sts.  The idea behind FHA Secure is a good one.  Get FHA to allow a refi of toxic 1st loans and a resubordination of the 2nd to a combined LTV that exceeds 100% of the property value. 

But the challenge is finding the holder of the 2nd loan and getting them to agree quickly to the resubordination.  The loans, like other mortgages, are securitized, packaged, sliced and diced, and sold to various investors presumably all over the world.  Finding someone to talk to is a problem.  Getting them to agree is an even bigger challenge.  Accomplishing all that before the homeowner goes belly up is darn near impossible. 

Perhaps we can legislate a mandatory or automatic resubordination of these 2nds, something that does not require asking their permission.  The 2nd holder would lose nothing, in fact they would avoid losses from foreclosures.  The home owner gets to live to fight another day.  She avoids the big payment shock and gets into a safe 30 yr FHA mortgage with no surprises.  We reduce the number of foreclosures which stabilize the real estate market and consumer spending.

Rich, we ought to be smart enough to correct future problems whether or not we bail homeowners out today.  The "moral hazard" of inadvertently helping out speculators in an attempt to keep honest homeowners in their homes seems small compared to the economic damage done by dispensing tough love.