I've been thinking about the really heart-wrenching stories in the housing bust.
The people with 0% down, who can't afford the house, have a non-recourse foreclosure, and then go back to renting don't tug my heartstrings. They were effectively renting, anyway, and I'd prefer to see our government staying away from the landlord business, with a goal of creating real value and ownership for people in their homes.
The stories that seem more awful are people who used their house as their primary means of savings. A retiring couple that put a huge amount of their net worth into a house, either by purchase or improvement. And I don't mean home-equity loans used for improvement. I mean, actual savings, spent in a declining market.
I'm contemplating what it would mean to have the government provide "savings insurance" that would guarantee, say, 70% of the equity in a home when it was transferred from some liquid vehicle. 20 years of mortgage payments would qualify, as would a 30% downpayment that was lost in a declining market. Cash-out refi's? Excluded.
I've not heard this proposal anywhere else, so I'm just writing it up to see if it holds water.
Maybe someone can make a counterargument, because I think this plan seems pretty reasonable. Though I can't estimate the cost, it rewards the right things. If you don't correct for inflation, it would have the effect of just "fixing" people who lost significant money due to the housing bubble, instead of people who bought in the last one, for instance.