I’m going to go against the grain here. I agree that too much Wall Street creativity is not the best thing. That said, I think the sharing the gain (and potentially loss) is an interesting idea. It allows people to bear the risk based on their view of the market.
In the current environment, one might be able to take a mortgage at a higher interest rate in exchange for downside protection. Similarly, one could pay a lower interest rate in exchange for giving away a portion of the upside (probably based on Case Shiller for an area rather than your own house price to avoid you letting it go to pot).
I’d be interested in a product that gave me a lower rate in exchange for my gain over the next 10 years…let someone else participate in that upside. I’d be really interested in a product where I could trade the potential gain for protection from the loss and wind up with a similar interest rate. If I knew I’d get a 100K check if the market went down 100K, I might be a buyer today instead of 2010.
