Are Foreclosure Vouchers the Answer to the Mortgage Market Mess?
There are a number of plans being proposed right now with regard to how to fix the mortgage mess by preventing foreclosures. Unfortunately, a lot of the ideas circulating out there are variations on a familiar theme: Throw money at a problem and hope it goes away.
Someone else is coming out with a new idea, though. At Middlebury College, an economist named David Colander is suggesting that everyone be issued foreclosure vouchers — even those who are not in danger of foreclosure. RealEstateProArticles.com has the details of the foreclosure voucher plan:
The key element in Colander’s plan is the use of foreclosure vouchers. The government would allot foreclosure vouchers to taxpayers according to income levels, with the lowest earners receiving the biggest voucher amounts and with people in certain high income levels excluded from the scheme.
The vouchers are foreclosure vouchers and therefore can only be used in two ways: to buy foreclosed properties or to pay mortgage loans to save homes from foreclosure.
For recipients who cannot use the vouchers because they are not facing foreclosures or are not interested in buying foreclosure properties, they can sell their vouchers on the secondary market at a discount. The discounted vouchers would attract investors to the foreclosed housing market, creating housing demand, restoring home prices and ultimately contributing to the nation’s economic recovery.
I admit that I find this suggestion intriguing. It could, in theory, lead to additional real estate investing in foreclosed properties, and stop some foreclosures from happening altogether. And the foreclosure vouchers would help reduce the amount that buyers would need to borrow, making it easier to get financing for the remainder of the purchase amount of foreclosed properties.
It certainly seems like a win-win for everyone involved. Of course, these plans have various Unintended Consequences that can throw the whole thing off track. But I do like that it’s something different. After all, it is supposed stimulate investment, and it offers potential rewards to those who have been making prudent financial choices.
