Sunday, December 27, 2009

Underwater Mortgages and the Share Economy

Twenty five percent are "underwater" on their mortgage or twenty-three percent according to the Core Logic report, which shows that in Arizona and Nevada, it is reaching levels of half the mortgagees. That is the home owner owes more than the house is worth, often having buying with no money down. They are walking away from their mortgage. Seventeen percent of defaults are strategic defaults. Share economy mortgage is the answer, the mortgage is a fixed per cent of their income.

What happens when they sell "under water." Let's say they purchased for $400,000. They agree to pay 25% of their income for the mortgae. They sell for $300,000.00. They pay $75,000 to the bank, keep $225,000.00, but continue paying the 25% of their income to the bank.

This evens the moral playing field between those who do what might financially best for them, and those who feel a moral obligation to continue paying their mortgage.

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