Moreover, it's my feeling that any government sponsored plan will likely miss the point. While there are many bright, well-meaning politicians working to come up with something, they really don't understand the mortgage industry. It's really up to us, the men and women in the mortgage banking industry to come up the answer. We certainly had no problem working in concert with Wall Street and the borrowers over the last few years in framing this issue. The time has come to solve it. Others better equipped than I will work on assessing blame and controlling future mortgage trends. The job of this article is to propose a solution that can be embraced by all.

I call this solution "Appreciating America." It's a plan that should be adopted by all of the servicers, promoted to all of the ailing homeowners and supported by the US Government, especially the Federal Housing Administration (FHA). FHA has told me that the use of this solution would fit exactly within the current FHA guidelines. It's a fairly simple plan, which can be put into effect immediately since it utilizes time-tested mortgage programs used in the commercial arena, which are generally referred to as shared appreciation mortgages. I believe that this is what Chairman of the Federal Reserve, Ben Bernanke, was suggesting yesterday when he stated: "The fact that many troubled borrowers have little or no equity suggests that greater use of principal writedowns or short payoffs, perhaps with shared appreciation features, would be in the best interest of both the borrowers and lenders."(Italics added). I couldn't agree more.

Appreciating America works as follows:

- The homeowner refinances outstanding mortgages with an approved "Appreciating America Lender" in accordance with established FHA guidelines regarding loan-to-value (LTV) and debt-to-income ratios (DTI). The loan is fully supported by sufficient income, LTV limitations and tied to past mortgage payment history.

- The Appreciating America second mortgage is held by the current mortgage servicer and defers payments and interest. The homeowner and lender will share in the future appreciation of the home to pay off the Appreciating America second mortgage within five years.

- The new Appreciating America second mortgage is a subordinated second shared appreciation mortgage equal to the difference between the new FHA mortgage and the existing mortgage(s). This second shared appreciation mortgage will accrue interest at 6%, with payments deferred, and will not be payable until five years after the loan is made (or the home is sold). At that time, the homeowner has a choice of refinancing the mortgage(s) or selling the home.

- To the extent that the value of the home at that point is greater than the FHA first mortgage amount, the homeowner will first receive an amount equal to all capital improvements made to the property since the Appreciating America mortgage closed, and then the homeowner will receive 30% of the appreciation and the second mortgage holder will receive the lesser of 70% of the appreciation or the principal and accrued interest on the Appreciating America second mortgage. All appreciation in excess of the second mortgage balance including accrued interest shall belong to the homeowner.

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