So, what kind of backlash do you think there is going to be when the average citizen looks down the street and sees that his neighbors, whom make 100K less than him own a house just as nice as his, and he is helping pay for it through a write down?
That’s exactly the question every politician or economist for preventing foreclsoures needs to be asked.
It’s a moral hazard. If it comes to this you may as well go out and buy the multi-million dollar dream mansion. And while you’re at it quit your current job, go to work at Starbucks making minimum wage plus tips, get your payment reduced to 38% of that income, then go back to your other job.
The most I hear these ridiculous ideas the more I truly believe it’s lip service for homeowners who don’t know better want prices to stay elevated, those facing foreclsoure who need help, and banks who are trying to sell these worthless assets.
The reality is lower housing costs are good for everyone. They either refuse to accept this, or are scared to admit it.