I’ve been arguing for this idea for several months now. As a country, we’ve been so excited about spending billions to keep non-performing homeowners from defaulting on their mortgages, that we’ve created a set of incentives for people TO default on their mortgages. Hey, that’s where the help is.
What if we gave incentives to people NOT to default on their loans? What if there were principal reduction programs or rate-cut programs, but those were available only to those with a clean mortgage history (for at least, say, one year)? How many people are paying credit card bills, but stiffing their mortgage company? Think that would happen if your interest rate declined by .5% every year you were clean? Or if you had $5000 of your principal balance forgiven for every 2 clean years?
And it seemed that nobody was listening, but now that is changing. Obviously nobody is going to listen to me, but perhaps someone important can get the attention of the powers-that-be. Last week Paul Jackson, the editor of HousingWire Magazine, called for a principal-forgiveness program for those that are NOT behind on their mortgages. Here’s a salient paragraph:
Imagine if the current group of performing-yet-underwater borrowers — effectively more than 14 million strong, or roughly three times the annual estimate for all mortgage market activity — were actually able to sell or refinance their home. Talk about introducing legitimate demand into a market quite literally starved for it. It’d be instant stimulus. It’d be the right kind of stimulus. And we’d not be hearing about a housing depression any further, either, as homes started to really move.
This likely means it won’t happen, of course, but it is nice to know I’m not the only one that can see how good a thing it would be.