That’s what BusinessInsider is saying, based on an op-ed column in the NYT. The idea is for the Feds to buy up all high-interest bonds covering homes whose owners are underwater and replacing them with 4% loans. The principal would not be reduced, so the homeowner would still be underwater but with a lower rate, he could keep paying rather than walk away.
Hmm – a homeowner who accepted this deal with be stuck in his house for life or until the market rose high enough to pop his head back out of the water, whichever comes first, because he could never afford to sell. If he owes $250,000 in principle and his house is currently worth $165,000, he’d have to come up with $85,000 cash at the closing table. How’s that gonna happen? Being stuck in one’s hose means, for instance, that you sell out and move from Detroit, with no jobs, to a more promising area. So more federal spending, decreased population mobility, and the feds running roughshod over lenders. Sounds like it should be popular in D.C.