Well isn't that special! 3% of what? If Joe McMansion owes 300K on his transitional colonial ranch, against what value shall we measure his equity? Against what he (over)paid? Against what he could sell it for in a forced sale? This scheme is a half-baked mess which only preserves the mortgage processors' flow. I'm confident that the next bailout for people who owe more than their homes are worth will be better conceived.
BTW, what's so wrong with foreclosure on people who bought and borrowed too much house? It's not like they're going to lose an arm or go to debtors' prison. So they have to move to a rental. Big deal. Be smarter next time.
It is the banks and investors who make out on this deal, that's the real secret.