Alternative to “All or Nothing”?

Banks should not be sending demands for larger and larger sums from homeowners in arrears on their mortgage. Instead the bank should offer to lower the monthly payments in return for part-ownership.

–Nassim Nicholas Taleb

Hmm, there’s an idea.

Instead of the bank foreclosing on your home if you can’t make the payments, instead give it partial ownership in exchange for reducing your mortgage (and the monthly payments).

That sure seems preferable to today’s all-or-nothing proposition, in which the bank takes title to 100% of the home through foreclosure, then takes a bath when the empty, deteriorating property sells for a huge discount — in the process undermining the value of all the nearby homes.

It also avoids the social upheaval and adverse financial consequences that afflict foreclosed homeowners.

Homeowners may not like the idea of suddenly being “partners” (co-owners?) with their banks — but, if they can’t pay their mortgage, it beats the alternative.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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