Resumen de A Loan Modification Approach to the Housing Crisis

Eric A. Posner, Luigi Zingales

• The housing crisis threatens to destroy hundreds of billions of dollars of value by causing homeowners with negative equity to walk away from their houses. We advocate a legal reform that would allow homeowners to reduce principal while giving mortgage holders an equity interest. Such a plan would give homeowners an incentive to keep or resell their homes, thus reducing the market value loss of homes while protecting the effective value of creditors� interests. Two further elements of the plan are that it uses prices based on the average house price in a particular ZIP code; and it is automated.