New Mortgage Fix Doesn’t Benefit Those Making Their Payments

The Bush Administration briefed Republicans today about a deal with the mortgage industry to halt the subprime meltdown. It might be released to the rest of us by tomorrow. One of the main concerns? Bloomberg reports that the mortgage fix doesn’t benefit those with resetting mortgages who are able to make payments:

“My biggest concern is that there are a lot of Americans who are making their mortgage payments, they are current, and the benefit won’t go to them,” Representative Spencer Bachus, the top Republican on the House Financial Services Committee, told reporters after the meeting with Paulson today.

Evidently, the main concern is for those who got in over their heads, and for investors and those in the mortgage industry who accepted the risk. The question of rewarding those who did not make sound financial decisions comes up, while those who maybe didn’t make the best decision, but didn’t over-reach, get nothing.

Additionally, the main flaw in the mortgage fix plan is that it is temporary. The extended rates would help for now, but if the borrowers don’t change their ways, in five years (or whatever it ends up being) when the teaser rate does finally end, the borrowers (and the rest of the economy) will be in the same place again.