To the People

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Monday, February 18, 2008

How Hillary's Mortgage Plan Is All Wrong

Hillary Clinton is proposing that on "Day One" when she is president she will freeze foreclosures for 90 days and freeze interest rates on mortgages.

Such "freezing" breaks one of the most important assumptions that underlie American prosperity: the enforceability of contracts. Re: the subprime debacle, lenders lent money to lendees at below-market interest rates knowing that they would either: a) get their money back at higher rates in futures years, or 2) the lendee would pay a penalty for getting out of the loan early and make the lender whole. Government mandated re-setting of terms for mortgage contracts would mark a new low for interference, be unconstitutional, and would likely result in higher costs for all home buyers as lenders need to compensate for their loss of contract enforcement.

Slate's take on this here.

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