[s1artibartfast]

Both are forcing the bank to take action, but I think that switching like for like is less of an imposition than a forcing the bank to sell.

It is interesting that banks dont already offer this for a fee. Im not too knowledgeable on the topic, but wonder if it has do with how mortgages are bundled, and the cost/paperwork of unwinding that.

[fshbbdssbbgdd]

The fact that someone who needs to sell will pay back the principal is valuable to the bank. If a bank starts offering the option to get out of the loan at a lower price, it would impair the value of that loan. The only way to make this happen would be to include it in the original terms of the loan (where this feature would be worked into the market math that sets the interest rate) or if the government changes the rules (which would result in a hole in balance sheets as the value of the debt falls).

[s1artibartfast]

Correct, there is some additional value from the upside that mortgage holders may need pay in full to terminate.

However, this upside should be priced into the Mortgage price on the secondary market as well.

there are other factors as well, like holders of mortgages may care about much more than their market value. They are balancing time returns, risks, and their portfolio of investments.