I heard a plan where a house would have its additional equity removed from the loan calculation but would still be due at sale.
So a $400K house with high $3500 payments might be revalued at $300K for loan purposes, with payments at say $2500 instead. But the loan principle would still be $400K and when the house was sold the borrower would owe the bank the full $400K. I don’t know if this would work... it might.
It doesn’t solve the problem of people walking away from no-down sub-prime loans because they have no stake in the property.
That’s actually not a bad idea. I do believe most people would take this plan and stay in the house.
But what is to be done with the vacant properties that have already be foreclosed on? If the government bought one for today’s value they’d have to sell it for today’s value so that’s a loss for the government.
McCain says with his plan the borrower has to have been qualified at the time of purchase. The question is “qualified under what guidelines?” Because most of those in foreclosure or facing foreclosure didn’t qualify and that’s why they got a subprime loan. Sometimes I wonder about McCain.