What do you folks think of this super-simple mother-of-all universal workouts?
Treasury can help a homeowner in mortgage distress by entering as an intermediary between the borrower and lender without much taxpayer impact.
1. The borrower stops making loan payments; the mortgage is in effect destroyed.
2. A new tripartite relationship is setup between borrower, the treasury (actually IRS, as the operating entity) and the lender.
3. The IRS, as a part of mortgage enforcement, garnishes 30% of gross income. This is very trivial as IRS already takes 7.7% payroll taxes for Social Security & Medicare. Adding an extra line to deduct 30% off the top line has near zero costs.
4. The IRS, pays out the 30% to the lender.
5. The above occurs for 30 years after which period the garnishment is stopped.
This system is similar to wage garnishment for Alimony/childcare enforcement.
I think the lender will come out better off than through mass foreclosure.
