Search This Blog

Saturday, July 14, 2012

Mortgage Help

Mr Nocera is correct in asserting that widely held mortgages and
uninvolved servicers are responsible for the failure to modify
mortgages with the consequent collapse of the housing market and the
waves of foreclosure that spread across America (Housing's LastChance, New York Times, July 10, 2012: A19).

There is however and easier solution to the problem than eminent
domain: the shared appreciation mortgage.

With a shared appreciation mortgage, a government entity would enter a
contract with the homeowner. The homeowner would pay what he or she
could afford on the mortgage, the government entity would pay the
rest. Depending on their respective contributions over time, the
ownership of the property would be shared by the homeowner and the
government entity. With the shared appreciation mortgage, there is no
need to renegotiate the principal. With this stabilization of the
housing market, there would likely to be a gradual rise in prices.

There are some disadvantages to this scheme: it may be more expensive
than the route of eminent domain. Those, including me,  who would like
to punish the banks and the lending agencies would be thwarted as the
mortgage would eventually be paid in full.

Nevertheless there would be major advantages: no need to identify an
eminent domain purchase price for the house, stable neighborhoods,
some continuity in tax revenues to localities, and less familial
stress, and a robust banking system.

No comments: