THINKING OUTSIDE THE BOX?

Mortgage broker Michael David White has updated several of his many useful charts. The one on negative home equity (i.e. you owe more than the home is worth) stands out. As you can see from the chart below, the number of people who can make money by walking away from their homes runs into the millions ... regardless which bank numbers you want to use.

White has a few suggestions for getting out of the current real estate mess. Fortunately it doesn't involve any of the stupidity or wishful thinking proposed through President Obama's Making Home Affordable Programs (and their equally worthless spin-off and/or affiliates). Seriously, President Obama's housing programs hould be renamed Making Banks Look Solvent, or Pissing Off the American Mortgage Holder, because of how they string homeowners along and keep homes (and CDO-like securities) from being marked down on the books.

Among the ideas from White that I like include "blowing up" the fake debts accumulated during the bubble days so that we can realistically match the price of housing to income. More specifically, this means we need to "massacre mortgage debt." One of his regular readers pitches in with this suggestion: Eliminate all interest on home loans.

Eliminating interest on home mortgages would go a long way in saving taxpayers from having to subsidize homeownership (through interest rate write-offs), while depriving the "Too Big To Care" banks of the money they clearly don't deserve. Sure it might lead to several big bank collapses. But they're not doing anything to help as it is, while their survival is pretty much tied to Fed guarantees and favorable legislation. In a real market environment, the services they provide will be picked up by smaller, more efficient banks, who would also know how to use Uncle Sam's bailout cash. 

- Mark