How to help underwater mortgagees

Eric Posner, a law professor, and Luigi Zingales, an economist, both from the University of Chicago, have made an interesting suggestion: Any homeowner whose mortgage is underwater and who lives in a ZIP code where home prices have fallen at least 20 percent should be eligible for a loan modification. The bank would be required to reduce the mortgage by the average price reduction of homes in the neighborhood. In return, it would get 50 percent of the average gain in neighborhood prices — if there is one — when the house is eventually sold.

From Underwater, but Will They Leave the Pool? in the New York Times.

It’s no secret that I would favor such a thing. About the only I haven’t walked away is because (I hear) Georgia is a recourse state.