Fixing the Mortgage Mess

I’ve come up with my own simple suggestion for saving homeowners facing foreclosure. In my opinion, the government should provide some sort of fat incentive for banks to refinance failing loans-to the current delinquent homeowners-for 40, 50, or even 80 or 100 years if necessary. At first this may sound goofy, but let’s think about what this would accomplish:

• The banks keep the bad loans and foreclosed properties on their books as assets instead of liabilities, which is what they become when the foreclosure happens. They also increase their own revenue stream by increasing the amount of interest income the mortgage produces. With a 60 year note, the first 20 years or so of payments is almost all interest. I would imagine that smaller payments composed solely of interest would help the bank’s gridlocked liquidity situation a lot more than no payments at all and a crumbling house occupied by homesteading squatters. I could be wrong about that one though.
• Of course the homeowners have no intention of living in the home for that long, but they would have lower payments (as a result of the longer loan terms), and a real chance to wait the market out to sell or refinance… because that could take 10 years or more. Time is the important thing here, not money. Not to mention that as inflation continues to erode our dollar, they’ll probably be able to refinance sooner anyway.
• The government would get off easy by only providing tax breaks or a small subsidy. And they would look like they actually solved a problem for a change, instead of continuing to pave the road to hell with their good intentions.
• Most important to me: the people who did the right thing and didn’t get themselves in over their heads won’t be stuck paying for all of the people that took these foolish jumbo ARM loans in the first place.
• The speculators that bought five houses and only put $1.86 down between them are just going to have to get a paper-route or something; I really, really don’t feel bad for these folks.

See, easy! To me, this is a solution that everyone can live with. At least I can.

Any thoughts? Anyone? Bueller? Bueller?