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March 20, 2009


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Drew Navikas

I notice two primary differences between your rough suggestion and a rough outline of the current Mortgage Affordability Plan (MAP): (1) the reduction in principal is more dramatic, while interest rates are unaffected; (2) the government potentially takes on downside risk in your proposal, as opposed to the up-front cash payments in the MAP (through subsidized interest and annual incentive payments).

So, I have two questions: (1) Shouldn't there be some mechanism by which the government can get a lien on the property if the homeowner pays the reduced principal on the home but fails to pay the alternative obligation to the government? (2) Why have the mortgage holder end up owing the government the remainder of the old mortgage's value, as opposed to owing the original mortgage lender on a new, unsecured debt?

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