Mortgage Clarity? Such an Idea!

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In a prior corporate life, I sometimes toiled to help produce benefits descriptions that were readily understandable by employees. That wasn't just benevolence on my part: A 1974 animal called the Employee Income Retirement Security Act (ERISA) required that workers be provided with understandable summary statements describing what was coming to them.

Now the worlds of housing and mortgage lending are in tatters. And with the likes of Countrywide (NYSE: CFC), Washington Mutual (NYSE: WM), Beazer Homes (NYSE: BZH), Hovnanian (NYSE: HOV), and Pulte (NYSE: PHM) -- not to mention millions of upside-down borrowers -- almost audibly sucking air, the Feds have come forward with the proposal that mortgage terms also be rendered simply and understandably. That's a revolutionary idea, Uncle Sam, but you're clearly several decades late.

Obviously, any number of reforms need to be bolted onto the world of mortgages, from originations to securitizations. But a clear and comprehensible communication of what the mortgage has in store for the borrower would be the most fundamental step toward rebuilding a housing market whose roof has caved in.

Through the years I've bought and sold more houses than I care to recall. But despite having a couple of graduate degrees, I've nearly always just shut my eyes and signed on the dotted lines of the gobbledygook-adorned papers that were thrust toward me at closing. Fortunately, but admittedly through few efforts of my own, I've managed to avoid the "got ya" repercussions that have befallen all too many mortgage borrowers of late.

But what does all this have to do with homebuilding and investing therein? Plenty. While I applaud Housing and Urban Development's efforts as a step in the right direction, unless and until they see the light of day, the world of mortgages will remain in disarray. And that disarray will be the scourge of a homebuilding recovery.

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