Mortgage reform

Honestly, I'm still waiting for details.  Treasury Secretary Geithner has not impressed me  in his three weeks in the position.  Twice now he's come forward with half baked plans with a promise that we'll get details later. 

Of details we do know:  Nobody can simply get their mortgage rewritten.  There are many hoops to jump through first.  The people hoping to have their mansions refinanced won't be helped; the program only works on conforming loans (basically those under $500k). 

What we don't know is more important:  If someone refinances under this plan and sells in two years for a profit who gets the profit?  Example:  I bought a house in 2005 for $400k.  I get to refinance and have the principal reduced to $300k.  In two years I sell the house for $350k.  The bank takes a bath for $100,000 while I get to pocket $50,000. 

Here's a plan I think most would accept:  Those who refinance give the bank 100% of the sale if done in the first five years.  (Any sale for below the refinanced price would have to have bank approval.)  Any sale from five to ten years out the gain would be split 50-50.  After ten years the owner owns the house and can do whatever s/he wants.

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We have no hope of achieving an economic recovery until there is a floor in housing.  I think this will help start to put a floor in housing.  It will be months, maybe even more than a year, before housing prices start to recover.  Until Geithner releases more details the right wing will continue to write the narrative for the proposal and it will have no prayer of passing.

 

CNBC's Rick Santelli grossly misrepresents the plan in this rant you see below, but perception is reality.  If people see the plan the way he does it is sunk before it is even debated.

Rick gets a little debate in this clip Eric sent me.