In the last post I noted that Shared Risk Financing eliminates the need for re-insurance. Therefore, this reduces the need for re-insurance schemes like Freddie Mac and Fannie Mae.
The Mortgage Mess happened because housing prices did not increase at the rate anticipated by borrowers. A large number of people owe more than their home is worth and are walking away from mortgages. There is a liquidity crises because banks have no way to know what their mortgage portfolio is worth.
Switching troubled loans from the mortgage to a shared risk contract would give the parties involved a clear idea of what they owned, and would restore liquidity.
A borrower would move from the situation where they owe a fixed amount on a house, for which they don't know the value. The lender would move from a situation where they have a fixed loan but don't know if the borrow will ever pay them back to actually owning a share of property which can be valued and traded.
The initial act of valuing and trading the SRF's would created a mini financial boon as the market re-aligns. The Feds would probably have to pour some cash into the pot to help home owners seriously underwater. The SRFs put the primary parties into a situation where they have better knowledge of their assets.