If Congress and Wall Street would ever listen to a cat, this is what I’d tell them to do about bad individual mortgage loans. First, they need to sort them into two litters:
1. People who believed they were getting great loans on houses they thought they could afford, only to get screwed by lenders who suckered them in with phony appraisals, extortionist fees, ballooning payments, and other one-sided terms.
2. People itching to “move on up” in spite of previous credit problems. They willingly let themselves be lured into unfair loans on houses they could never afford, possibly thinking they’d make a killing on appreciation and come out way ahead.
The people in scenario #1 deserve a break. They never intended to bite off more than they could chew. Helping them shouldn’t cost taxpayers a cent.
Their loans should be simplified and converted to fixed rates with a cap on interest. Banks should be punished by earning just enough profit on them to stay alive, and then watched so they won’t try to screw anyone again.
The Democrats like my idea but, as usual, the Bush Administration and Republicans are opposed. Why help little guys when Wall Street CEOs are hurting?
As for the people in McMansions, let them go to foreclosure. It’s the only way to make these Beverly Hillbillies face reality. Their stupidity deserves no reward. They’re a slap in the face to every person who bought a house the old-fashioned way – in a neighborhood they could afford with a straightforward mortgage.
Banks can take losses on the foreclosures. Payback is hell. They should never be allowed to profit from the greed that created this mess.