Comments on: The Indecision Will Continue Until the Economy Improves https://windypundit.com/2008/11/the_indecision_will_continue_u/ Classical liberalism, criminal laws, the war on drugs, economics, free speech, technology, photography, sex work, cats, and whatever else comes to mind. Wed, 12 Nov 2008 22:46:03 +0000 hourly 1 https://wordpress.org/?v=7.0 By: Joel Rosenberg https://windypundit.com/2008/11/the_indecision_will_continue_u/#comment-1351 Wed, 12 Nov 2008 22:46:03 +0000 http://www.windypundit.com/?p=1393#comment-1351 I can’t believe you said that, either. I don’t think I could be much more in favor of making adjustments so that folks who have overextended themselves have a chance to keep (or, at least, make a graceful downsizing exit from) the homes that they overextended themselves to get mortgages on, but a straightforward bailout seems to me to be the worst way to throw money at the problem, and then fail, and then not have the money. (There are apparently something like eight million mortgages that are going to be foreclosed on over the next year or so, and the three hundred fifty billion that’ll be left after the present spree is done barely covers the average foreclosure cost.)

I don’t think bankruptcy-mandated cramdowns are a great idea, either, but they’re pretty clearly (IMHO, and all) better than the money-throwing approach.

My own theory is that the pain and cost should be borne, as much as possible, by the parties to the mortgages, for the ‘moral hazard’ issues, perhaps even more than to keep me out of paying for more of it than I should have to, as I didn’t either take out a bozoid mortgage, nor invest in them.

Which is why I like the proposal where somebody can go to his mortgage holder, give back the mortgage, stay in the house, and pay rent for up to five years, then reclaim the mortgage at market value, with the mortgage holder getting 50% of the profits if/when the property is sold. It would let the people most closely involved both share the pain and work toward establishing the value of the mortgage as a saleable instrument.

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