How about hundred year mortgages?

[Stinky The Clown]

That headline is the extreme. But how about if, instead of giving money to the people who already fucked us over by making shit loans, creating 'securities' in such a way that they actually were able to make money by doing essentially NOTHING but selling already digested food, we find a way to keep people in their house.

No free rides. Everybody pays.

The banks, cries of 'crisis' notwithstanding, can eat a few hundred billion in losses. That's a declarative sentence, not a recipe for some punishment. They can, indeed, weather this storm.

For the government's part, why not buy up (or at least guarantee) the mortgages. Modify them so they become affordable. Lower the rate. Extend the term. The point here is twofold. Keep people in their houses in a way they can pay their own way. And instead of flooding the market with hugely reduced value foreclosed houses, this will soften the value decline, and maybe even cut it off right now.

I am in no way suggesting free rides for mortgagees. If you incurred a debt, you still have it. If you made a loan, you get paid back.

People get to keep their houses, the banks get something, the government keeps its money and we move on.

I would also like to see a VERY vigorous investigation into who got rich, who played fast and loose with the rules, and how we can prevent it. The cap on CEO pay is a good thing, in my view. Get some ETHICS standards that have the bite of law.

[MANative]

1. I may be crazy, but I think I remember hearing

about 99 year mortgages being offered in CA a few years ago when prices went absolutely nuts. Don't know much about the impact of those, but your idea is definitely intriguing.

[Stinky The Clown]

3. Actually, they have been available in Japan since they had their financial crisis .... what? .....

.... 20? .... 30 years ago?

It isn't a bad idea. It is a legitimate loan. The interest paid is far more than the principal. The only downside is that it is not an instant gratification thing.

[TexasObserver]

2. That is very unlikely to happen.

First of all, it's simply not economically feasible. A hundred year obligation on a home loan is a problem. It's almost a certainty that a default will occur, because at some point, the value of the home will not be sufficient to warrant the monthly payment.

Secondly, the difference between a 30 year mortgage at 5% and a 100 year mortgage at 5% is only about $115 a month per $100,000 of debt. Stretching the payments out to 100 years from 30 doesn't do the consumer much good, but it assures he or she will never pay off their home, EVER.

If you want to help homeowners stay in their homes, replacing their bad loans with loans that garner 5% interest for 30 years is the way to go. It is the advancing of the interest rate beyond 5% or so that makes house notes untenably large. If we can make loans available at 5%, we can keep most homeowners in their homes.

I would favor that the funds used for bailout be instead used for guaranteeing new loans for existing home loans, all at 5% fixed for 30 years. We have to have new mortgages if we are to keep people in homes. We cannot effectively rewrite all those private mortgages. We can replace them with lower interest rate loans, however, with a program designed to do so.

[Stinky The Clown]

4. The OP didn't postulate that all mortgages go to 100 years.

It postulated that we extend the terms and adjust rates as needed to let people stay in their houses.

100 year mortgages have been in place in Japan for decades.

[TexasObserver]

6. It won't happen here. If you want to fantasize it will, that's your choice.

keep chasing your tail with this silliness

[yodoobo]

5. Banks would love it

Well maybe not.

I've tinkered around with the amortization tables on longer than 30 year mortgages.

The actual monthly payment between 30 years and 100 and 1000 year mortgages is very small.

However the difference in interest paid is massive.

Besides, banks have already created this in a sense, with interest only loans. that hasn't worked out so well.

As someone above suggested, a default is a almost a certainty. With a 100 year loan, 99.9% of the borrowers will die before paying it off at full term.