Sunday, March 28, 2010

Mortgage Bailout--only adjusting payment not mortgage amount

According to an February 2009 posting, the federal government will simply allow the mortgage holder who has fallent into arrears to stay in the house--the payment will go down but the total amount of the purchase will remain the same. According to the article, they will become renters except they will be responsible for their own repairs.

However, as I have pointed out earlier, if they have a right to live in the house, have their families live there after they leave the area or pass on, or to rent it out themselves, that will give them a sense of connectivity to their residence and all the psychological advantages of renting. (I recall a Wall Street Journal article that reported on a natural experiment in Argentina of giving some people the right to live in their own home, and that found that those who owned their own home did much better in life. I found articles that found those who got land tenure in Uruguay avoided certain diseases. In Buenos Aires, a similar natural experiment, found that those who got title to their property were more likely to believe that "effort pays off" and that "money is important to be happy."

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