What do you think? Is revising the bankruptcy code to allow first mortgage amounts to be arbitrarily changed a good idea or a bad idea?

Question 2: Expanding FHA

Another concept being floated would allow the refinance of up to $400 billion in loans from private holdings into FHA-insured holdings, especially in the case where the value of the mortgage presently exceeds the value of the home - or in cases where a borrower faces foreclosure.

In one proposed arrangement, lenders would agree to allow the reduced mortgage to be refinanced into an FHA-backed loan, with the difference between the old loan amount and the new loan amount put into a "negative equity certificate." These certificates are a form of lien against the property which grants the lender of record rights to any price appreciation (up to the limit of the difference "owed" the lender) if the property should be sold. In this case, the FHA would hold the certificate and claim a portion of the future gains. Other versions have the original lender getting the certificate in exchange for taking a "haircut" on the loan.

In another such arrangement, the lender would simply agree to reduce the amount of the loan to 85% of a current market appraisal and allow it to be refinanced into an FHA-backed loan. This would theoretically result in a smaller loss to the lender than if the property were acquired through foreclosure. These non- or partially-performing loans would then become "the government's problem."

Advocates say that these could be viable ways to help borrowers who cannot refinance in the "private" market (since their loans are "underwater") into more affordable loans. Depending upon how any such program is structured, a lender wouldn't need to realize any immediate losses on the loans, since they would have claims for some future return, and these "certificates" -- the rights to future equity -- could be bought and sold in an open marketplace, allowing lenders to clear their books of them if they desire. Alternately, the FHA might have a chance to recoup money "fronted" to borrowers should their home appreciate.

Critics note that the FHA already has plenty of risky loans in its insurance pool, and that expanding the program to include new borrowers would leave taxpayers on the hook should enough of these new loans fail. That's certainly a valid concern, as the proposed expansion could also include borrowers with a recent history of missing mortgage payments.

What do you think? Is extending FHA to cover more risky loans and borrowers a good idea or a bad idea?

Question 3: The Tax Credit Gambit

Another proposal under discussion would offer tax credits -- amounts from $7,000 to $15,000 are being bandied about -- to purchasers of new or foreclosed homes.

Proponents say that these financial incentives will help stimulate sales, boosting housing markets.

Opponents note that these amount to direct giveaways of taxpayer money to help support two groups: homebuilders, who may have contributed to the current problem by overbuilding, and lenders, who wish to quickly clear their books of foreclosed homes. There's even some concern that speculators who contributed to the present troubles might ultimately benefit, too.

Do you think these incentives are a good idea or a bad idea?

Question 4: Towns as Landlords?

Yet another proposal would dole out Federal money to towns and cities which would buy foreclosed homes to help stabilize neighborhoods. These homes could possibly be used for affordable housing needs or even sold at a later date for profit.

Of course, there's no such thing as "federal money;" it must come out of taxes, the issuance of new debt, or both.

Proponents say that the ability of towns and cities to buy up these homes will support home prices and tax receipts.

Opponents note that it can turn cities into landlords, a task for which they may be ill-suited, not to mention having local governments competing against potential private market buyers who have strong interests in getting new buyers or renters into these homes. They also correctly note that many cities already hold sizable inventories or homes foreclosed upon due to lack of tax or utility payments.

Do you think it's a good idea, or a bad idea, for local governments to get into the "foreclosed real estate" game?

Question 5: Time-Release Housing

One of the imbalances in the housing market is that there's too much supply of homes and too little demand by homebuyers. Of course, this is being made worse by lenders foreclosing on properties and "dumping" them back out into glutted markets -- which presses home prices down further.

It's hard to stimulate demand by buyers in this market (short of giving away mortgage money), but managing the supply of available homes may be possible. Of course, while it's not feasible to prevent private owners from putting a home up for sale if they wish, there may be ways to provide incentives to slow the flood of inventory into the market from other sources.

For example, lenders with sizeable inventories of properties could be encouraged (though tax credits, perhaps) to hold onto and maintain properties so that these homes could be put back into the market at a measured pace, especially in the most challenged markets.

These incentives could be keyed to the amount of time a property is held off-market and related directly to the amount of money expended in acquiring and maintaining the property. There could be incentives for three-, six-, or even 12-month intervals, and the program could self expire at some point over the next year or two (sooner or later if the market has or hasn't improved substantially).

This concept hasn't yet been proposed by anyone (that we know of), but we've been kicking it around here as a intellectual pursuit. What do you think? Are incentives to help manage the flow of "supply" into the market a good idea or a bad idea?