Miracle Cure for Mortgage Ailments

We've been discussing the pros and cons of a federal bailout for homeowners facing foreclosure. Should the government mandate lenders freeze rates? I thought that would be a good idea, till I read on The Motley Fool that the rates to be frozen were teaser rates. Frankly, I don't want someone who bought several properties at 1% or 3% interest only loans to be supported in their opportunity to spend money they don't have. Why? I'm jealous! I studied the opportunities, lived within my means and did not increase my own real estate portfolio on its ride to doubling values for a quick buck.

But I did like everything Morgan Housel said in yesterday's edition of The Fool. Here's an excerpt.

We need to face it: We got carried away, we got in over our heads, and now we're staring the consequences square in the face. Lowering interest rates, injecting liquidity into the banking system, and bailing out homeowners who took on mortgages they couldn't afford unless they won the lottery will by no means bring a healthy solution to the problem we face.

Amen, brother! Housel goes on to say that solving too much credit by making credit easier to get is foolish–and not the good kind (motley!). I suppose it could be argue it'ds homeopathic…give a little of the poison to the sick person to make him or her well, or immune. But we're insatiable. We want what we want when we want it and that means everything and now!

Bless their hearts. Bernanke [Federal Reserve Chairman] and Paulson [Treasury Secretary (and former Goldman Sachs CEO)]  truly just want to get our financial system back to how it used to be in the good old days, when mortgage-backed securities grew on trees and anyone with a heartbeat and a smile could take out a mortgage for any ungodly amount of money they wished. After all, their job is to ensure the financial system stays healthy and Joe Consumer stays out of trouble.

It's interesting when government tries to protect us from ourselves, especially after we've gone on a bender (bought too much house) and gotten a DUI (foreclosure notice).

Doesn't it just make you sick?