Where's my bailout?

According to the NYT, the Treasury Department is mulling over the idea of establishing a one year program to subsidize mortgage rates at 4.5% for new home purchases.

Is this a good idea? Well, if the purchasers are required to go through typical credit checks, establish their ability to make their mortgage payments, and have to put up a down payment of some sort, then it's not that bad of an idea. Without those constraints, it's going to be every bit as bad (if not worse) as the very subprime loan fiasco that got us where we are already.

However, this plan isn't going to do anything for homeowners in foreclosure or delinquent on their payments (a number that now includes one out of every ten homeowners), which is really where the problems lie right now. And it's not going to do anything for homeowners (like myself) who were silly enough to stay current on their mortgages, and might like to take advantage of the opportunity to refinance at these rates.

And there's no real consideration (that I can see) for what happens to purchasers that buy at these rates, and then lose their jobs and can't pay their mortgages. So this idea might end up encouraging even more people to purchase houses that they soon won't be able to afford, and end up dragging even more people down into this mess.

Granted, the National Association of Realtors supports the idea, so on principle it should be probably chewed up and spit out. I guess it's worth considering, but there needs to be a lot more discussion about how this all is going to work, and what the long-term ramifications could be.