Blackeyebart

Geithner's Plan: A Look at the Options

CDO's were created to achieve a higher average value for a block of assets than they would have achieved separately. It worked for a while, as investors took the ratings at face value. . But now CDO's probably are worth LESS than the value of the composite parts because there is no way to prove their true value.
The obvious answer is to unwind them - but how? One way is for the Courts to force the CDO owners to sell in their holdings and to bid out for the component parts. It would be rational to allow others to bid also. The more buyers the better the price.
The key problem with this is that Institutional Owners would have to face up to the real value of their assets and this might not be popular. For the ordinary punter the liquidity benefit is probably worth the value risk. In most cases they would be better off.

Obama's Foreclosure Plan Helps Banks More than Stimulus

If I understand this correctly, it would be more beneficial for a home-owner to do the bankruptcy step first rather than try and sell the property all by himself.

If he acts alone, he ends up carrying the loss alone. If he takes the bank with him to court then the bank gets to share in the shortfall.

Once this step is taken there is no obvious reason for the home-owner to sell. He has to live somewhere. If this process were widespread it may influence the number of houses for sale, which would be an additional benefit all could share.