Consider me your coal mine canary.  You see two years ago I studied to become a real estate appraiser.  My studies ended about the time I could see the market heading nowhere pretty fast.  Noting that I was one of the very first to over leverage my home to the point of absurdity and then to lose it, I am beginning to feel somewhat like Nostradamus so here is my prediction for today: No amount of feel good regulation is going to shorten the current mortgage period of adjustment or prevent another such occurrence in some other industry.  The folks at the top of the food chain are just too good at coming up with workarounds and the people at the bottom are just too uneducated about the whole process.   

Speaking with Erin Burnett on CNBC's Street Signs, Hank Paulson said this about the Mortgage Origination Commission which would be created under the programs brought out today by the White House:  "it would do two things"...(set)..."national standards in terms of training, education, monitoring..."  (comment by Ms. Burnett: "They would have to pass an exam or something.") "then what it's going to do is evaluate the state programs."

In response to a question by Ms. Burnett about whether such a program would have diminished the current fiasco, Paulson replied, "If we had something like this up and going I am optimistic that we wouldn't have seen the same level of abuses and problems."

Hank must at least receive some credit for not over selling the Commission but let's have a brief look at the appraisal industry and its oversight and ethical standards when considering a commission to oversee the mortgage brokers.

Ethics training makes up a substantial portion of studying for an appraiser's license.  The current standards for appraisals and the licensing of appraisers grew out of the savings and loans crisis of the late 1980s.  Out of that debacle came the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  To go further along this line of thought would require more acronyms than the alphabet can handle so let's just say that there was an inordinate amount of attention to ethics amongst the bodies that govern appraisal as an art form.   I am sure that a large percentage - probably most appraisers - take these standards seriously.  I am also sure that the appraiser who drove by my house in 2000 and gave it a value $40,000 higher than any other house in the subdivision knew all about the ethics by which she was supposed to write up her findings.  I would also think that folks at Bank One - where my mortgage eventually landed - looked at her signature as a licensed appraiser on the loan documents and said, "Hey, I'm sure this is one fine house."

Increased regulation takes a little bit of heat off of the government.  It makes the tax payer feel slightly less aggrieved about having his/her money supply the pie server in what is going to become an even larger slice of the mortgage and investment banking pie.  Regulation allows Wall Street to grouse about the increased paperwork and the price it has had to pay for the bailouts it has received and will received.  Does regulation solve anything?  Does it save any homes from foreclosure?  Does it make avert the gaze of an investment banker looking at the possibility of incredible rewards in return for incredible risk?  No, no and no.  Increased regulation creates a bureaucracy pushing a lot of signed papers back and forth between a lot of people who will most likely never be in the field to check that any of those papers represent the truth.

Solving the mortgage crisis requires something neither the public nor most of our elected/appointed officials are willing to do.  Face the fact that a lot of greedy, less than knowledgeable home buyers were taken advantage of (in some cases criminally taken advantage of but in a lot of cases not) by greedy individuals and institutions.  Many of these individuals and institutions were smart, some were smarter than others and some were as dumb as the home buyers they screwed.  Housing prices are going to have to come down to realistic levels and that is going to hurt some people who did absolutely nothing wrong.  Homes are going to be be lost to foreclosure by some people who did nothing wrong (they deserve help) and by a lot of people who did everything wrong.  The solution lies not in trying to forestall these events but in educating the home buying public. 

People who bought homes with ARMs and had no idea that ARM means adjustable rate mortgage not one of those things that hangs off a person's shoulders should have read their loan documents a little bit more closely.
People who put $3,000 down on a $250,000 house should have been buying a $15,000 house.  People who didn't have any income but did have a $2,000 house payment shouldn't be surprised that they are going to lose their homes.  People who believed brokers who told them things that were not specifically spelled out in their loan papers and still signed those loan papers are most likely up the mortgage creek without a legal paddle.  All of these cases are lamentable, trust me, trust me, I do know.  

The truth is that the mortgage industry has become just that: an industry, a worldwide industry.  Very few banks keep and service their own loans.  No matter what the commercials tell home buyers and potential home buyers, it's not a good idea to have a "pick a payment" mortgage, to consolidate one's "paid for dinner and a movie" credit card debt on the back of a home loan or to use up one's equity building a family kitchen with eat around island and two sub-zero refrigerators.  We have become a greedy, have it all now, think about it tomorrow society and someone needs to tell us that.

And take it from the canary, car loans and credit card debt are meltdowns-in-waiting.