The Fed has rolled out new regulations today to save consumers from evil, bad, naughty mortgages and home equity loans. Interestingly, the Hon. Richard Posner, Seventh Circuit Court of Appeals judge by day, U. Chicago law school lecturer by night, had an opinion piece in today’s Wall Street Journal on just this issue. You must read them both. Do it NOW! ‘Puter’ll wait.

Done? Good. Time for ‘Puter to vent.

If adults are too stupid to read their mortgage documents, or to hire an attorney to do so for them, then they are too stupid to own a house. It is not rocket science. Look at the note. Do the payment terms match up with what you were told by the bank? What is the principal amount of the note? What is the interest rate? Is the interest rate fixed or variable? What is the maturity date? As a practical matter, most residential mortgage documents are issued on Fannie Mae approved forms, so there’s not much variability. Take some got-danged personal responsibility.

As Judge Posner notes, many Americans make perfectly rational decisions to take riskier financing options. In a variable rate mortgage, the mortgagor gets an initially more favorable rate, because the mortgagor is accepting the interest rate risk. Conversely, the fixed rate mortgage costs more initially because the bank is keeping the interest rate risk. It may be more valuable to one borrower to pay less initially and take the interest rate risk. Perhaps the borrower anticipates his income increasing over time, enabling him to refinance out, or to meet the higher rates that are certain to come. Another borrower may be willing to pay for the security of a fixed rate product. One thing’s for certain, it’s not the government’s place to tell borrowers what’s good for them.

‘Puter can already hear the wails from the bleeding heart do-gooders. Mortgage brokers took advantage of people! Bush lied, housing market died! Redlining! ‘Puter says B.S. ‘Puter has not seen one prosecution of a mortgage broker for fraudulently misleading borrowers as to the terms of their loans. There may be some prosecutions, but if it were a real issue, there’d be tons of prosecutions, and it would be national news. The real story is that borrowers got greedy, as did mortgage brokers. People were caught up in the madness of the housing bubble and made bad investment decisions. People sucked equity out of their houses at a fantastic rate. Banks lent with no money down and without income verification. It’s not that most people didn’t know what they were signing; they did know. It’s that those people took a gamble and lost. No amount of disclosure could have prevented that. Grownups made bad decisions with their money. Grownups should bear the consequences of their bad decisions.

There’s a pretty good method of preventing housing bubbles, massive defaults and speculation in residential real estate. Require a 20% down payment for first residences and 30% or more down payment for additional residences. That way, borrowers have some skin in the game. But that won’t work for a Democrat controlled Congress. See, requiring that people be able to pay for what they buy is an insidious form of racism and classism to Democrats. The government should make sure everyone has a house. Even the stupid.

And thus the Fed’s new regulations, and the start of a new bubble.

'Puter

Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.

’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.

The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.

His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.

He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.

Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.

‘Puter suggests the Czar suck it.