I keep reading and listening to all the news releases, and I don't see anything getting fixed. I can't believe Washington has no solutions. Why do we elect these clowns?
I have a solution for the mortgage crisis, but it's too basic and rational to be accepted. It's just the simple concept of returning to underwriting home loans.
Here's how my solution would work:
Beginning immediately, a home loan for an owner-occupied primary residence would have an interest rate of no more than 6%. Any rate above that would draw a $100,000 fine per violation.
Before any such loan could be foreclosed upon - if it had been written in the past three years - it would have to be reviewed by a special master appointed by a bankruptcy court. The property would be reappraised, the borrower's credit would be rechecked, and the loan would have to pass a standard underwriting qualification.
If any of the information had been compromised in the original loan documents, the purchase would be set aside, and the loan agreement would be rewritten by the court.
If the review determined that the borrower never had the financial ability to service the loan, the lender would get back the property without further recourse. If the original appraisal or loan terms were unfair to the borrower, the court would rewrite the loan principal amount and fix the interest rate at 6% or less, with the lending institution taking the loss.
It's very simple: If the borrower had lied, the bank would get the property. If the real-estate agent, loan originator or builder had taken advantage of the borrower, then the lending institution (which should have known better and not written the loan in the first place) would sustain the loss.
No one would get a free ride, but equity should prevail. The guilty party would take the loss.
This may not be a perfect solution, but it is a workable one - and better than anything the Washington crowd has offered. Nothing can proceed until confidence in the credit market is restored, and that can be done only one properly underwritten loan at a time.
