Apparently, people are speculating that the United States Government is planning to become the source for mortgages.
From a fiscally responsible viewpoint, this may well be beneficial to taxpayers in the long run. As a lender, the goverment would earn a profit in the form of interest on the loans they would have in portfolio. In addition, they would be able to monitor the performance of the mortgages readily and respond early to any perceived systemic risks.
Our favorite Uncle could pretty well do whatever they felt necessary at the time as any crisis presented itself. They could let's say unilaterally reduce everyones mortgage balance by 10% or 20% or whatever in order to create a positive home equity condition immediately.
This should have the effect desired by previous attempts to jump stsrt the real estate market and the economy. If the government held all outstanding mortgage debt it would over time recoup the forgiven principal in the interest income. Homeowners would not feel the need to just give up on an upside down position in their home, but, will strive to keep their home and look forward to having it grow in value once again.
The challenge with this senario is what will happen to the banks who are dependent on the interest income for their survival.
We definitely are living in interesting times!
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