Mortgage "Fix"

I'll openly admit to my liberal leanings, but this mortgage crisis has elicited little empathy from me.

Dear lenders and mortgage backed security purchasers (those who bought the mortgages from the lenders), you are big, sophisticated outfits. To you, I say caveat emptor.

Dear America, you need a crash-course in personal finance. I don't care who told you what on the phone. This is a house. It is worth several times what you make in 1 year. If you don't understand enough about finances to buy it (or enough about your loan to pay it), don't.

That said, there are now reactions from the President and candidates, including Billary. POTUS wants to freeze variable interest rates. Problem is, his plan does nothing. Here's why.

1. The plan applies only to those current on their mortgage. People who have never missed a payment can likely pay -- they don't need the serious help. (I know, for some it is a stretch -- just not as big as for those who clearly can't make payments).
2. The plan simply freezes rates. Why are you taking a stab at the banks who lent to people who have demonstrated the ability to pay a variable rate?
3. The plan does nothing about those who are late on payments and/or facing foreclosure. Any plan that does nothing on this front is simply useless. I don't know what the correct action is, but you can't claim to be fixing the problem if you do nothing to address this end.

Billary's plan is even worse:

1. She also wants a rate freeze for those current on payments. Again, BFD. This is symbolic and goes against the terms of these people's deals.
2. She does include rate freezes for some people behind on payments. That's a little better.
3. But she wants a 90 day freeze on foreclosures. What is the purpose of the 90 days? Is it just to give Congress time to figure out a course of action? If so, fine, but make that clear. If it's supposed to do more...well, what are three months going to do? Give you a Christmas and then kick you out in the dead of winter? Great.

Other plans that have been floated include subsidizing mortgages (this will cost so much it would give you a heart attack), reforming lending practices to force lenders to sell the loan with the best rates (which contradicts the very nature of a capitalist market), and/or expanding the roles of Fannie Mae and Freddy Mac (I don't know enough to comment).

You know what will really help? For the banks to clean house on this, take a one-time Machiavellian loss on these mortgages, not by foreclosing (which is insanely expensive given that the resulting housing stocks will stay on the market forever), but by writing down the loans to the actual appraised value of the property today and developing a payment plan with the current owner. Yes, banks, you lose, but you have to admit that you really lost a long time ago when you bought these loans -- it just took a while for everyone to notice.

My 2 cents.