An informal survey indicates that most Americans would support government-funded mortgage payment relief. Is this a cockeyed plan, or a viable solution to reinvigorate the economy?

Imagine a year with no mortgage payments. How would that impact your life?

According to an informal Portland Business Journal survey, a lot of people like the idea. Some 46 percent of respondents said that Congress should implement a one-year mortgage holiday, while only 30 percent were opposed to the plan.

European mortgage holiday

Variations of the mortgage holiday have been implemented in Spain and the U.K. In Spain, unemployed mortgage holders can defer up to half of their mortgage payments for two years. The government guarantees the deferred payments, and the Spanish lender's participation is mandatory. U.K. officials are considering a similar program called the Homeowner Mortgage Support Scheme. Currently, some U.K. lenders voluntarily offer mortgage payment deferrals, but the deferred interest is added to the loan balance.

A website called SaveOurEconomyNow.com details a more robust mortgage holiday proposal for the U.S. Under this plan, all U.S. mortgage holders would have the right to defer their mortgage payment in full for up to one year. The government would subsidize the lenders by paying the interest on those loans at a nominal fixed rate. Cost estimates on the website target a total government cost of about $600 billion-a huge sum, to be sure, but less than what will ultimately be spent on the Obama administration's new stimulus plan.

Money in your pocket

A nationwide one-year mortgage holiday would accomplish something that other stimulus programs have not: it would put money directly into consumers' wallets. The SaveOurEconomyNow plan also incorporates a provision for renters, whereby mortgaged property owners would pass on up to 50 percent of their mortgage-holiday savings to their tenants. As a result, homeowners, property owners, and renters would benefit from the plan.

How would a one-year mortgage holiday change your finances? Would you save it? Pay down debt? Buy an American car?

Proponents say that banks and lenders would benefit from this proposal too; they'd be spared the costs of defaults and foreclosures for the year. What's unclear, however, is how such a holiday would impact banks' ability to make new mortgages. The government-funded interest payments may cover some of the banks' operating expenses, but they wouldn't replenish funds needed to make new loans. This is one aspect of the U.K.'s proposed mortgage holiday plan that U.K. lenders have openly criticized.

What do you think?

Where do you stand on the mortgage holiday issue? Should Congress take the road most traveled, and pass a massively expensive stimulus program that may only indirectly affect most American households? Or should lawmakers blaze a new path to put money directly into people's pocketbooks? Does a government-funded mortgage holiday reward bad behavior by temporarily bailing out those who bought homes they couldn't afford? Or is such a drastic measure necessary to shut down an economic cycle that's spun wildly out of control?

Published on March 8, 2009