Bush mortgage plan would freeze rates – Los Angeles Times: “Bush administration will release a plan today that is expected to block many mortgages from adjusting to higher rates for as long as five years.”

It’s a pig in a poke. Even if it staved off recession, which it won’t because not enough mortgages would be able to qualify, it’s doesn’t help people. It just helps money. Perhaps the most silly part of the plan is the requirement that equity has been gained.

The five-year freeze will be offered to borrowers who live in their homes, are current on their mortgage payments, have accrued at least some equity in their homes and whose income indicates they cannot afford higher payments.

That means the value of the home has to have increased since the owner purchased it. A few years ago, I would have said Cool, they should’ve gotten some equity in about an hour and a half. Not anymore.

Millions of people bought at the height of the housing bubble, borrowed 100% on an overpriced home, and instantly were in upside down. Houses that sold around here for a million are worth $750K now. Where’s the equity in that?

The lending industry got people into this mess, and the lending industry needs to shoulder the burden of getting them out. It’s nothing but abject studpidity to loan hundreds of thousands, or even a million bucks, with no money down, secured by nothing but a single family home.

The solution is simple: restructure the loan to a fixed APR, and spread it out over 30-50 years, so the borrower can make the payments. It’s a win for everybody, because no one has to lose his home, the bank isn’t stuck with a house in a falling market, and the investors behind the bank don’t take it … badly.