A Very Good Plan
Anglachel has good, solid, well thought out plan for helping home owners in her post, Mortgages, Foreclosures and Moral Hazard.
A feature of putting the proposed system in place that isn’t discussed is that this plan will establish a framework that many banks will adopt to reduce their losses, so it won’t be a government only system. Banks do not want to own houses. They will lose even more money if they foreclose and the property doesn’t sell quickly. An unoccupied house or condo goes downhill amazingly quickly and the bank is liable for the property taxes and any code violations while it is in their possession, so the losses mount over time. If there is an accepted framework for restructuring loans that reduces losses and provides an on-going revenue stream, the banks will take it.
If the government can “create” $700 billion to bailout the banks, who did this to themselves, it should be able to find some money to save other “victims”. We might even make a profit.
