KISS... 'Keep It Simple Stupid!"

Lately, I’ve been reading article after article about the rise of foreclosures, the effects of foreclosures and that the root cause for the need of this bailout plan, currently in Congress, is the current housing crisis. And no one seems to know what to do! Now I’m no economist, so I see the solution as a simple one. I went to a military college where I was taught the adage of “KISS”… Keep It Simple Stupid or rather it was frequently yelled at me.

But to me the solution would be to modify the terms of these bad loans. Ok… you may say that these people should not have gotten into these loans knowing they couldn’t afford them. So why give them relief. Then I would tell you that these lenders should not have made unscrupulous loans without verifying the info they received from the borrower. For the life of me I don’t understand, from a lender’s perspective, the justification for the underwriting department using stated income documents. As a lender, if one of your main procedures is to mitigate risk by determining the creditworthiness of a borrower, why wouldn’t you take more caution by at least verifying what the borrowers puts on the documents?

Then you might say… “Well interest rates were at historical lows causing banks to practically give money away.” Well everyone does share the blame for this crisis. But I think to avoid taxpayers footing the bill, just modify these loans. The banks will become liquid again which in turn will ease the credit crunch. These mortgage backed assets will take a slight decline in value, but when the mortgages are adjusted and homeowners start making payments again, these assets, at the least, will have a determinable market value. A value that, I believe, will appreciate at a faster rate than the current solutions. And the final result will be a restoration of confidence in the American economy.

And in the end, I won’t have to read so many articles about foreclosures!


As always feel free to post your thoughts!

Damien

"With Wealth, comes Responsibility!" Matthew 25:14-30