Conservative Housing Ideas (Good ones)

Well, mostly good ones...and a snide comment about OWS that should have been left out.

There are 3 ideas listed from conservative economists. The first idea--principle write down split between government and banks with resulting mortgage being recourse--is pretty good, with the recourse issue being a little odd (I'll address in a bit). The second--also principle write down but with sale "profits" split 50-50 between the lender and homeowner--is a good idea, particularly for investment/second properties. The third--give everyone a 4.2% mortgage interest--is an ok idea, but not really a good one.

Essentially there are probably 4 groups of homeowners in this country to be concerned with: 1. owners with equity, but high interest rates 2. underwater owner occupied who plan on staying 3. underwater owner occupied who may want to move 4. underwater second/investment property owners.

Owners with equity can move/sell/rent and really aren't a problem, but lowering their payments through low interest refinancing would help the economy...especially if their equity is < 20%. So lower interest is fine here, but not a solution for the bigger problem of underwater mortgages. (Also, for those not under water, it is possible to get an interest rate below 4.2% now.)

The other three groups are the ones dragging the housing market down. Some principle write down is necessary if we want the housing problem to go away in any reasonable period of time. So some combination of the other two ideas would probably be best.

The recourse option is interesting, though it only affects people with non-recourse loans, many of whom would be better off foreclosing than they would taking this deal. However, there is an exception for group 2 above. Owner-occupiers planning on staying for a while would get the benefit of write down and the recourse option would be of less consequence since they would most likely be in the house long enough to have positive equity when selling.

Second homes, and owner-occupied homes where the owners want to move and sell or plan on moving within a few years would not be interested in switching to a recourse loan. They might, however be willing to accept the other write down deal.

Counter the snide comment about Occupy Wall Street, I think that these are solutions that many OWS supporters would get behind.