Foreclosure Fix

To help prevent further foreclosures and to stimulate lending, I think taxpayers should buy up parts of shaky mortgages. Here is how it would work. Say, for example, a homeowner with a documented income is unable to pay his or her monthly mortgage in full. For this person, taxpayers (through the federal government) would buy down a part of the mortgage principle to a point where the homeowner would be able to make reasonable monthly payments. Taxpayers would now own part of the homeowner’s home, and the bank or entity that held the original mortgage would immediately receive an infusion of cash from the transaction to be used for future loans.

Here are some suggestions as to how taxpayers would be repaid: If the home were eventually sold for a profit, taxpayers would first receive their original investment and would share in any profit in proportion to the percent of the home they owned. If the home were sold at a loss, taxpayers would receive their original investment, with interest, before the homeowner received anything. If the homeowner eventually paid off the mortgage, then he or she would have to continue to make payments until taxpayers were paid in full, with interest. The homeowner would also have the opportunity to buy back the taxpayers’ share in the home at any time.