Pass and sign into law legislation mandating that lenders reduce homeowners' mortgages to the respective homes' fair market value (FMV) in exchange for lenders' equity participation in property appreciation; the difference between outstanding mortgage amounts and FMV to be guaranteed as were TARP, FNMA, et al. Mandate that all “underwater” mortgages be re-written for 30 years at “preferred” interest rates and terms.
Why is this important?
An economic hiccup would devastate the finances of more than 10 million "underwater" homeowners, throwing many into foreclosure. Mortgage lenders would be swamped with foreclosed homes. Already strapped homebuilders would be brought to their knees. In brief, we're one housing financial hiccup away from a National financial death spiral.
Yet, without spending a dime or raising taxes a penny, the threat of fiscal calamity can be avoided by passing legislation that: (1) relieves banks of their capital requirements vis-a-vis mortgages, (2) mandates that lenders re-write "underwater" mortgages at current market value (marked-to-market), (3) mandates that homeowners cede to their lenders the difference between the amounts owing on their mortgages and FMV, and, (4) mandates that lenders re-write mortgages for 30 years at "preferred" interest rates and terms.
