About
When I was 46 I started writing essays on life, or the state of the human condition as I once called it. Because I was halfway between old enough to vote (21) and planned retirement (72) it was known as the "Halfway Point" series of essays.

Later when I mentioned the essays in one context or another on USENET, I got requests for copies and eventually for future essays. Thus the mailing list was born, and it moved to the Internet when that became widely available. At that time I moved to writing on a schedule, the 1st, 11th, and 21st of the month.

Now the trend is to "blogs," and read on demand. I am therefore making this available as a blog, and we shall see if people read it here, or by mail, or not at all.

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A better way to do a mortgage bailout (15:54)

There has been a lot of talk about a government mortgage refinance package, as part of the effort to get money moving. The popular proposal seems to be to have the government buy a bunch of defaulted sub-prime mortgages and hope someday they will be worth what we pay for them. In the meantime, the taxpayers will bail out both the innocent people who found that their payments had gone up while their house value had gone down, and the less innocent, like speculators who bought the house to "flip" under the assumption that prices always go up, people who bought with the idea of renting out the property and letting the rent make the payments, and a small number of people who never could afford payments on a mortgage and never should have been given one. And in all cases the interests of banks which gave loans with virtually no qualification process will be rewarded for their bad behavior.

There is a better way. A way which will cost the taxpayers vastly less, save the banks which acted with some measure of good sense, and still keep the majority of homeowners in their homes.

The solution is for the government to take a second mortgage at very low interest, and have the bank take a first mortgage for the actual current value. A mortgage which they agree not to sell or divide. Thus the homeowner gets to keep the home, paying only a 1% or so interest on the 2nd mortgage, the original bank gets the face value of the 2nd mortgage, and the taxpayers are only on the hook for the difference between the current and original value, holding a mortgage which can be collected when the house is paid off or sold.

And by limiting the size of the 2nd mortgage to some percentage, perhaps 20-30, of the first mortgage, there's some probability that the house value will rise to actually cover the value and will be paid off. If the mortgage in default is higher than the current value of the house plus the 30% 2nd mortgage, then the bank will have to choose between foreclosure and taking the difference as a loss. A punishment for helping people get in over their heads.