"The Trickle-Up Plan"

"Foreclosure Vouchers?"

by Mark Thoma of the RGE Monitor

Give people a tax cut or rebate as in a standard fiscal stimulus package, the government would distribute to taxpayers mortgage foreclosure vouchers. These vouchers can be used either by homeowners to pay mortgages on homes in severe danger of foreclosure, or to help homebuyers to purchase foreclosed homes.

As with other stimulus packages, these vouchers would be distributed to taxpayers based on their incomes with those with the lowest incomes receiving the largest vouchers and those with incomes of, say, over $200,000 receiving nothing at all. ... The vouchers, however, could only be fully used by homeowners facing foreclosure or interested in buying a house in foreclosure.

For the majority of taxpayers who cannot use them, the vouchers could be sold on a secondary market... These vouchers would likely sell at a discount, perhaps of about 25%. Since the plan will increase demand for foreclosed housing, it will stop the fall of housing prices, thereby helping to end the housing crises and starting the economy on the road to recovery. ...Instead of a rescue scheme that relies on the benefits trickling down from Wall Street to Main Street, the benefits of this plan will trickle up from Main Street to Wall Street.

The Trickle-Up Plan would ... help keep people in their homes and create demand for housing currently in foreclosure. By doing so, it will help stop the fall in housing prices, and also increase the value of the lowest elements of the mortgage backed securities - precisely what governments wants to do.