While the government has been busy bailing out Wall Street and shoring up banks, it has been sorely overlooking the needs of taxpayers, homeowners and future generations, according to an op-ed piece in the October 29 Wall Street Journal cowritten by Professor Noël Cunningham (LL.M. '75), Andrew Caplin, a professor of economics at NYU, Dean Thomas Cooley of the Stern School of Business, and Mitchell Engler, a professor at the Benjamin N. Cardozo School of Law.
The authors argue that the way to put a stop to the "vicious cycle" of falling housing prices and increasing foreclosure is simple: reinvigorate the shared appreciation mortgage, or SAM, which gives homeowners a chance to write down a portion of their mortgage debt in exchange for sharing future appreciation gains with those who helped them out. The SAM, they go on to explain, "was pioneered by banks in the U.S. some 40 years ago, but it has been allowed to languish due to an archaic, IRS-imposed block. (The IRS hasn't ruled whether such a contract is a mortgage because it combines elements of equity and debt.) This block could be removed at the stroke of the Treasury secretary's pen."