Is this really the free lunch that is in fact free?
At the risk of confusing even a derivatives expert, the free housing puts that homeowners have received over the last many years can now be exercised into free lower-strike housing calls... and the original housing put is still be unexpired.
It looks like homeowners - a class of housing put and housing call owners - are now able to exercise their free housing put without having to change the ownership status of the house nor abandoning the housing straddle position that was given to the buyer at purchase closing.
A lender will renegotiate your mortgage to a lower principal-owed level.... They have lowered the homeowner's cost and price basis. The homeowner effectively sells the house to the lender at original cost and rebuys it at the lower price level at not cost (without ever having to give up the house and eat some personal credit rating). This is an even better scenario than the free straddles - the strike for the free call just got lowered without charge to the option holder.
It's like owning a house that is floating price on the way down and fixed price on the way up. At no cost. Housing derivatives are unable to offer this product at no cost.
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