Underwrite every loan as if it’s a rental. Obviously, most of the loans that would quality would be foreclosures and short sales which are by definition closer to the “bottom.” This would alleviate, although not eliminate, a large part of the “further decline” issue.
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That sounds fairly reasonable to me. To clarify:
1. Underwrite mortgages/appraise houses based on market rents (I’d suggest long-term averages to help keep short-term distortions from having too much influence).
2. Require at least 10% down, and it cannot be seller-financed.
