What's Wrong with This Suggested Solution to the Mortgage Mess? - Seeking Alpha
I’m wondering about the practicality of the suggestion that homeowners who are under water and unable to keep up with rising/confiscatory mortgage payments be converted temporarily to leasees, with a local bank as the leaser. The monthly lease payments would be held at some formerly affordable level while the market bottoms out. Housing and employment markets will at some point in the foreseeable future stabilize at a point where the homeowner is again solvent and, one hopes, interest rates are suitable for converting to a new, affordable fixed rate mortgage.
A New Class of Mortgage - the Neutral Mortgage
Such a product could be seen as a way station between a conventional mortgage and a reverse mortgage, a new status of “neutral” mortgage in which the owner voluntarily becomes a tenant for a number of years while the markets stabilize. An arrangement established as part of a federal housing market recovery program.
The idea is to incentivize banks to resume their former model of making, selling and servicing mortgage loans in their markets, the de-collateralization of the industry, complete with financial underwriting. Next, it intends to keep people in their homes until order returns to the real estate market. Finally, it provides for the tenant to become the owner again, with a new, smaller mortgage loan within, say, five years. It would specify insurance and property tax payment arrangements, etc.