I don’t want to be one of those libertarians who thinks his shit doesn’t stink. But I simply cannot believe what is happening.

Here’s the deal: a plan is being circulated that would freeze the “starter” interest rates for certain borrowers for 5 years. The plan claims to weed out speculators by requiring that freezes only apply to homeowners who actually live in their homes.

Did I miss something here? A few years ago, amid skyrocketing real estate values, lenders came up with creative ways to help families afford homes, fulfilling the American dream for millions of people (and further inflating home values). Instead of the usual 30-year fixed rate plans, lenders offered adjustable rate mortgages with low introductory rates.

At real estate closings all across the country, people signed documents pledging to repay the lenders, or else lose their homes. It seemed to be good to be true–$599 a month for this 8 bedroom home?–because it was. Now, as real estate prices start to normalize, and starter rates begin to reset, these same people can no longer afford their monthly payments.

“But it’s not my fault! How am I supposed to read all the fine print? I signed hundreds of pages!”"I expected to refinance in 2 years, when the value of my home had quadrupled! How was I supposed to know that real estate values wouldn’t continue to skyrocket forever?”

I know, I know, I should be more sympathetic. I would be, if it wasn’t coming out of my checkbook.

I know about adjustable-rate mortgages, because I used to have one. And I had to sell my condo before the rate reset. Did I go crying to the government for help? No. I sold the condo into a flat real estate market, and got out.

Besides torturing those Americans who did act responsibly, what other implications will this plan have? It will:

1. Artificially prop up real estate values, prolonging the inevitable
2. Make lenders extremely cautious, so it will be harder to buy a home in the next 5 years
3. Redistribute wealth from responsible people to irresponsible people
4. Make politicians like Hillary Clinton appear to be crusaders for “justice”

Here’s a clip of Hillary’s responding to the Bush plan. Straight from the horse’s mouth. Note her insistence that the “mortgage industry” VOLUNTARILY submit to her will, followed immediately by the “or else.”

UPDATE: I agree with this editorial from the WSJ (available w/out subscription for 7 days)

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