Consider someone who is 20 percent underwater on her house. If she moves from a six percent loan to a 3.5 percent loan (today's rate on Zillow), and if house prices go up by only one percent per year (something that I think likely will happen in most markets, for reasons I stated a week or so ago) and if the borrower keeps her payment constant, she will be right-side-up in around four years. If she remains in the six percent mortgage, however, she won't be right-side up for about nine years.
Note the HARP 2.0 is not rewarding "bad behavior." It is program for people who are current on their payments but who are also upside down. Many people can look at four years and see a tunnel's end--I am not sure that is true about nine years.
Of course, refinancing will not solve the Vegas-Phoenix-Inland Empire problem, where many borrowers are 30 percent underwater and more. But for a whole lot of the country, HARP 2 could be a game changer.