I don't have a lot of information about this yet, because everything right now is preliminary.  That being said, keep your eyes and ears open for a new proposal by the Bush Administration that would allow people with mortgages that exceed the value of their home to refinance.  How the difference in value-ie negative equity would be handled is yet to be determined.   I have talked to many home owners who are upside down.  Rather than a short sale or foreclosure, they want to stay in their home.  At the same time if they had an ARM, they may have a higher payment that can't be refinanced because of the loan to value.  What if you could just refinance what it was worth?  Wouldn't that be powerful!  The biggest question would be how to deal with the evaporated equity.  It will be interesting to see what can be created or if this will die as an idea that just can't be brought to the market.