I find the statement by Elizabeth Warren, Congressional Oversight Panel Chairman, particularly telling of the current state of the housing market, “One in four homeowners who has a mortgage is now below water. And this damages, not only their ability to repay, I’m going to be really blunt, their incentive to repay.”
In regards to the “disincentive” to repay, I had a closer look at the “value-to-price gap coverage” proposal for underwater homeowners that are current on their mortgage payments proposed by Keith Gumbinge at HSH.com and I think this idea has some real merit. If something isn’t done to disincentivize strategic default the housing market recovery will drag on significantly longer