Don’t Walk Away, Renee

Calculated Risk reports that the Office of Thrift Supervision is tossing around the idea of using government-insured loans to help homeowners underwater on their mortgages. The OTS proposal would involve issuing something called “negative equity certificates’ to homeowners that would be redeemed when the house is sold. The New York Times today also reports that policymakers are weighing the idea of using government funds to purchase and refinance these mortgages.Any kind of bailout won’t be an easy sell, and some think there’s nothing that should be done to stave off a painful but necessary correction in the housing market. But things haven’t been this dire regarding negative equity since the Great Depression. The prospect of large numbers of people walking away from their homes, and the effect that would have on the economy, obviously is becoming a bigger cause for worry.