Ending the Mortgage "Crisis"    rev. 03.12.2008 Back to Lessons

Bernard Condon, in the December 24, 2007 issue of Forbes Magazine, offered the idea which could stop today's "Mortgage Crisis" in its tracks.

Vary duration, not monthly payment.
The risk with an adjustable-rate mortgage is that the monthly payment can shoot way up when it resets.
Why not keep payments fixed but translate a higher interest rate into a longer term for the mortgage?
Adjustable-length mortgages apparently aren't offered in the U.S.

What you need to ask yourself, your bank, your Congressional representatives is:
Why is this alternative not already available?!

We don't need the US Government to pass laws that, in effect, give them the power to modify, eliminate or void contracts between consenting adults in the financial business.

We don't need to have millions of people losing their homes and we certainly don't need to be besieged by millions of pages of newsprint and hours of wailing talking heads

We need something incredibly simple in concept yet a bit difficult in execution: We need to change the thinking of people in the banking business and mortgage business to include the incredibly simple concept of "adjustable-term montages" in their minds and make the actual financial process available to homeowners at risk today as soon as possible.

This, in no way, is a small project, as simple as it may look on the surface. Neither was the much ballyhooed and extremely threatening "Year 2000 Disaster." The "Y2K" apocalypse was averted through intense work by many people, despite the fear-mongering in the national and international media.

Today, we need the same concerted effort to transform the Mortgage and financial industries, and equally quickly.

If we don't, the "Subprime Mortgage Disaster" will become the "Prime Mortgage Disaster" and what could have been a small bump in the road will turn into a chasm: a long recession, affecting millions of people in America and around the world.

And it can be averted.


Do what's necessary to be done to make mortgages convertible into "adjustable-length" mortgages, by agreement and renegotiated contract between lenders and borrowers. No government laws or interference is necessary or even desirable.

In simple terms, as Condon described it, the low contractual monthly payments would be retained, but the term [duration, length] of the mortgage would be extended to compensate the lenders for not raising the interest rates, per the contracts.

It's more than a win-win for everyone. The "Foreclosure Crisis" will disappear, homeowners will keep their homes and avoid bankruptcy, mortgage companies and banks will not end up stuck with empty houses to rent or sell below market, and the market values of the homes will not suffer the drastic drop they would in a world of widespread foreclosures.

What to do now?

Or things will get a lot worse than they would otherwise!

Update: 03.12.2008: Copied from this link at The Washington Post, by "LookInTheMirror"...

LookInTheMirror wrote:

Can anyone answer the following questions:

1. Is it a requirement of someone to sign paperwork that they don't understand?

2. If someone calls you on the phone and invites you to invest in a "time-share" and attend a seminar, would you go?

3. Would you purchase a home with a zero percent down payment?

4. Do you think on average that Americans save more annually than other developed nations do?

5. Do you really think that putting someone "new" in the White House is going to solve your personal financial problems?

6. Do you blame Financial Institutions and the leaders' in Washington for your current financial predicament?


If you answered "yes" to any of these questions, I recommend the following advice:

a) Find a financial mentor that can assist you in making large or complex decisions.

b) Go back to school and try to obtain a skill that will allow you to earn more income

c) It is not a requirement that you purchase a home. In fact many people are just as happy renting one.

d) Look in the mirror and take personal responsibility for your own financial decisions, instead of "wishing" that others (i.e. the government) will bail you out and solve your problems for you.

One final thought: due to the lack of responsible savings, and inability for people to make intelligent decisions, our country is headed toward major economic problems that can not be solved in a timely manner. I fear that the only way out of this mess is for those that make intelligent choices to pay for those that do not. It is really that simple.


First rev: 12.29.2007