{"id":1891,"date":"2007-09-05T07:13:10","date_gmt":"2007-09-05T14:13:10","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1891"},"modified":"2007-09-05T07:13:13","modified_gmt":"2007-09-05T14:13:13","slug":"instead-of-a-bailout-of-troubled-borrowers-why-not-implement-an-equity-sharing-plan","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1891\/instead-of-a-bailout-of-troubled-borrowers-why-not-implement-an-equity-sharing-plan\/","title":{"rendered":"Instead of a bailout of troubled borrowers, why not implement an equity-sharing plan?"},"content":{"rendered":"

Via Poor and Stupid<\/a>, TCS Daily has a free (or at least free-er) market solution to bailouts for struggling mortgage borrowers<\/a>.<\/p>\n

The idea? “[A] debt-for-equity swap with sub-prime borrowers.” Borrowers would give up 20% of their downstream equity in their homes in exchange for 20% debt and therefore payment relief:<\/p>\n

To implement the swap plan, government would create an agency to buy equity from troubled borrowers. Call this new agency Bailie Mae.<\/p>\n

When a borrower swaps with Bailie Mae, the borrower’s monthly payment of principal and interest immediately falls by 20 percent. Instead, Bailie Mae provides the other 20 percent of the monthly payment. The borrower still has to pay the full cost of other components of the mortgage payment, such as taxes and insurance.<\/p>\n

As long as the borrower makes the new monthly payment, he stays in the home. When the home is sold, 20 percent of the gross proceeds go to Bailie Mae. At that time, Bailie Mae will be responsible for repaying 20 percent of the outstanding balance on the mortgage loan.<\/p>\n

For example, suppose that the outstanding balance at the time of the swap is $100,000, and the borrower’s monthly principal and interest is $800. With the swap, the borrower’s monthly principal and interest payment would drop to $640, and Bailie Mae would pay $160 per month.<\/p>\n

Several years later, the borrower gets a job in a new city and sells his home. By this time, the outstanding loan balance is, say, $90,000. Bailie Mae is responsible for 20 percent of that, or $18,000, with the borrower responsible for the remaining $72,000. If the home sells for $110,000, then 20 percent of that goes to Bailie Mae, which means $22,000. Another $72,000 is used by the borrower to pay off the loan, leaving $16,000 to go to the borrower.<\/p>\n

Suppose that the house is sold for only $80,000. In that case, Bailie Mae gets only $16,000 even though it still has to pay $18,000. The borrower gets nothing, and $62,000 goes toward paying off the loan. The cost of the remaining $10,000 shortfall in paying back the loan is borne by the responsible lending Read more<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Via Poor and Stupid, TCS Daily has a free (or at least free-er) market solution to bailouts for struggling mortgage borrowers. The idea? “[A] debt-for-equity swap with sub-prime borrowers.” Borrowers would give up 20% of their downstream equity in their homes in exchange for 20% debt and therefore payment relief: To implement the swap plan, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[26,6,5],"tags":[],"class_list":{"0":"post-1891","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","7":"category-marketing","8":"category-real-estate","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":4789,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4789\/deregulation-is-the-new-regulation\/","url_meta":{"origin":1891,"position":0},"title":"Deregulation is the New Regulation","author":"Brian Brady","date":"October 2, 2008","format":false,"excerpt":"From the Wayback Vault in The New York Times Building: Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":866,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/866\/hard-money-life-as-a-legal-loan-shark\/","url_meta":{"origin":1891,"position":1},"title":"HARD MONEY: Life as a Legal Loan Shark","author":"Brian Brady","date":"January 7, 2007","format":false,"excerpt":"Loan broking in the private mortgage marketplace can be the most rewarding sector of the lending. I have helped families who faced foreclosure due to unforeseen negative events. I've watched a businesswoman land a huge contract because she could access quick capital. I've beamed with pride as a property investor\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1855,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1855\/the-new-york-times-goes-on-a-countrywide-manhunt\/","url_meta":{"origin":1891,"position":2},"title":"The New York Times goes on a Countrywide manhunt","author":"Greg Swann","date":"August 25, 2007","format":false,"excerpt":"The New York Times on the Countrywide mess and how the company got there:ON its way to becoming the nation\u2019s largest mortgage lender, the Countrywide Financial Corporation encouraged its sales force to court customers over the telephone with a seductive pitch that seldom varied. \u201cI want to be sure you\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9405,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9405\/reversing-a-trend-or-back-to-the-future\/","url_meta":{"origin":1891,"position":3},"title":"Reversing a Trend Or Back To The Future?","author":"Brian Brady","date":"August 1, 2009","format":false,"excerpt":"If you're considering a reverse mortgage, get it now. The reverse mortgage market is going to blow up as big as the sub-prime market did.\u00a0 This time, like last, it's those \"durned borrowers\" acting differently than the rockets scientists predicted they would.\u00a0 In the sub-prime market, it was assumed that\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3317,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3317\/farewell-countrywide-how-the-bank-of-america-merger-will-keep-wells-fargo-as-the-mortgage-origination-leader\/","url_meta":{"origin":1891,"position":4},"title":"Farewell Countrywide: How The Bank of America Merger Will Keep Wells Fargo As The Mortgage Origination Leader","author":"Brian Brady","date":"July 2, 2008","format":false,"excerpt":"WARNING!\u00a0 Long commentary about the Bank of America\/ Countrywide merger ahead: Bank of America Press Release from July 1, 2008 (italicized) with my commentary: CHARLOTTE, N.C., July 1 \/PRNewswire\/ -- Bank of America Corporation today completed its purchase of Countrywide Financial Corp. to create the nation's leading mortgage originator and\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":852,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/852\/what-isaac-newton-knew-about-mortgage-lending\/","url_meta":{"origin":1891,"position":5},"title":"What Isaac Newton Knew About Mortgage Lending","author":"Dan Green","date":"January 4, 2007","format":false,"excerpt":"I recently wrote about sub-prime loans for the first time in a long while because the sector should start taking more headlines in the papers. 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Sub-prime loans are a big part of mortgage lending. \"Sub-prime\" is a broad-sweeping term\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=1891"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1891\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=1891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=1891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=1891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}