Treasury studying home refinance plan »

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  STONERS

  Feb. 21, 2008, 12:03 p.m.

  "The program would create "negative equity certificates" that would in the long term help servicers recoup losses from refinancing a mortgage when a home's value has dropped."
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  nostalgia

  Feb. 22, 2008, 5:05 a.m.

  Here's another article on this with an example of how it might work:

  Mortgage crisis: Don't forgive debt, just postpone repayment

  A new plan from the OTS would have lenders reduce mortgage balances, but let them collect the difference later.

  Instead of having lenders forgive the difference between the old mortgage and a house's current resale value, called a short sale, the OTS advises that lenders issue a warrant or "negative amortization certificate" for the difference. If a home regains its market value and is then sold, lenders have first claims to the profits.

  If the house later sold for $100,000, the lender would collect the $80,000 mortgage balance plus the $20,000. If the sale realized more than $100,000, the certificate holder might even get interest on top of the $20,000. Any profit beyond that would go to the borrower. The warrants could be publicly traded.

  http://money.cnn.com/2008/02/20/real_estate/OTC...
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  marshx

  Feb. 24, 2008, 12:25 p.m.

  thats a better approach i think, forgiving debt creates all sorts of problems.

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