[aspiringsensei]

This is a great question: I am working on getting you an answer from a derivatives expert.

I suspect the reason has to do with difficulty inherent to unbundling existing derivatives contracts in order to isolate "your" mortgage, but I'll circle back when I get an expert opinion.

[johngalt]

Why would you have to isolate "your" mortgage? Couldn't you just buy the equivalent number of shares in the correct CDO then present them as payment to your bank? Rather than try to follow the mortgage all the way through the system, just focus on each end.

I'm sure this isn't allowed contractually, but there was a lot of paper torn up by the federal government during the bailout. I would argue that this change would have been less damaging to all parties invovled.

Consider that everyone that owned a home would be scraping every dime they have together to put money into this system. There would still be loss, but this would stop the panic and add a floor to the housing/debt markets.