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Keith Gumbinger, a vice president at HSH Associates mortgage consulting firm, has proposed a new mortgage relief program he calls “value gap coverage.” In this plan, he proposes that if a borrower did not cause the decline in their home’s value, and has been making their monthly mortgage payments they should be subsidized rather than punished for doing the right thing. One of the primary differences between the Gumbinger and government plans is that the government plan requires mortgage holders to take a write down, and the “value gap coverage” doesn’t. In addition, Gumbinger’s idea absolves the borrower of any deficiency. Gumbinger believes the “value gap coverage” would reduce interest payments, and the incentive for strategic defaults. Another distinction of the “value gap coverage” plan is that the cost of this program would be known from inception and would go down as the time passed. This type of plan could be very successful in areas, like Stockton, where default rates are high by providing incentive to homeowners that could lead to a more stable market.

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