Opinion: Paradigm Shift in Mortgages

Many analysts believe that President Obama's Housing Rescue Plan, although well conceived, may not go far enough. There is also an understandable concern about moral hazard implications of any rescue program.

Some critics question the plan's focus on marginally "under water" and soon-to-default mortgages rather than the millions of homeowners who "have been doing the right thing" but are suffering the consequences of housing market de-valuation.

Could a more systemic solution be necessary, perhaps requiring a paradigm shift in the way people finance home ownership in America? This may be the time for truly "outside the box" approaches to be considered, at least to provoke more original thinking on the subject.

One radical approach that could have broad impact is the creation of a simultaneous hybrid "mortgage/lease" form of financing. Under this concept, homeowners could theoretically own as little as 51% of their home and finance that partial equity with a mortgage, while simultaneously leasing the remaining position in the property from their bank.

Homeowners would be responsible for real estate taxes, but would pay a low monthly rent for the bank's portion of their home.

Upon future sale of the home, the bank would receive higher-than-proportionate benefits of the appreciation of the property. Although higher minimum equity shares for homeowners could be mandated to avoid concerns that this program would "over-stimulate" certain housing markets (and to ensure that banks receive a fair return for the equity they retain), a minimum homeowner share of 51% is necessary to ensure that homeowners -- not banks -- control all decisions to buy, improve or sell their homes.

Because a government subsidy would probably be required to give the bank a fair return in cases as extreme as 51% homeowner equity, it is more probable that a mortgage/lease, leaving the homeowner with 60% to 65%, would be the lowest feasible example in unsubsidized cases.