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shared risk mortgage

bank and customer share the risk
  (+4, -3)
(+4, -3)
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this is a variable value mortgage.

if the average house price goes up 2% in one month then the debt also goes up but by half the amount i.e. 1%.

and likewise if the average price falls by 2% the debt falls by 1% too.

hopefully stabilising the market a little.

NotationToby, Aug 05 2013


       Boned. My first instinct was to bone it on grounds that loan amortization calculations are already way to complicated for the common borrower, and I could not expect a lender to be able to explain the repayment schedule when the capital/principal is an undefined amount but I was intrigued so I spent a few minutes with amortization calculators and was momentarily convinced that the idea has value, but I realise there are too many variables at play, so the bone sticks.   

       Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world.
Tulaine, Aug 05 2013

       No bank would do it, because it increases their risk at a high risk time. That is, homes are most likely to decrease in value at the same time mortgages are going into default.   

       No customer should do it, because the possible benefit to them is much lower than the possible loss. It's rare that a few percent drop is enough to save someone who can't make their mortgage, but the increase in house value over the life of a 30 year mortgage is almost certain to be positive.
MechE, Aug 05 2013

       Still waiting for that number to go positive here.
RayfordSteele, Aug 05 2013

       If you bought at the peak before the crisis, on average it might be 2020 before you get ahead, still well within a 30 year mortgage, and probably even within a fifteen.   

       I'll concede there might be a few cities where that won't apply, but typically it's going to be true.
MechE, Aug 05 2013

       The bank already shares the risk by virtue of giving the money and the borrower's ability to drop the loan.   

       And ultra recent history notwithstanding, what is more stable or predictable than real estate?
theircompetitor, Aug 05 2013

       If a bank own a crappy piece of property they might do this just to get it off their books as a non performing asset. Bet if you look hard you can find some bank that has either written what you have in mind. Or a mortgage with a amendment that does something similar.   

       If the motgage is not in standard format it will be hard for the bank to sell it to other banks or those mortgage investment funds. If they can't sell it, they can't fund the next mortgage. Their business grinds to a halt until they find the money to lend again.
popbottle, Aug 05 2013

       More flexibility in this type of thing is good, but fairly assessing the change in value is difficult.   

       Also, as a homeowner I would expect that if I made improvements, teh ank shoudl not get 50% of that value, but even if I kept reciepts, how do you count sweat equity? And what about someone who maintans the house poorly. I think most mortages have a clause requiring the owner to maintain it, but that is genreally nor enforced. Obviously an assesor would make some evaluation of the house, but quantifying the reduction in value due to neglect would be very subjective.
scad mientist, Aug 06 2013

       //What's more stable or predictable than real estate?//   

RayfordSteele, Aug 06 2013


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