> A more quasi-socialist variation on this: you could create a
> public entity that would buy the defaulted mortgage at a discount,
> collect the rent to help fund its operations, and eventually
> turn the house into some kind of limited equity property managed
> by the new entity.
I guess the real issue here is that what is needed is a way to refinance the subprime mortgages that have crushed the borrower. Most of the subprime that will default would be fine if the terms were stable ... Yes, if you could get your borrower to hold onto and service the ARMs that are jumping up, you could make a nice return; but if the alternative is foreclosure, something more creative is required.
Shouldn't lender self-interest (ahem) win the day on this?
An under-performing loan is way better than a non-performing one, for all involved.
/jordan