Yesterday’s flurry of proposals to overhaul the financial system (not to mention the resignation of Alphonso Jackson), have the nation buzzing today. However, some of the talk is about what the Democrats have already proposed in terms of fixing the mortgage market mess. And there is the usual talk about whether or not yesterday’s proposals would truly help the housing market (and by extension the rest of the financial market).

Some mortgage industry experts feel that the steps already taken — interest rate cuts, broader roles for Freddie Mac and Fannie Mae, and lending on a massive scale by the Fed — are enough. But some feel that while the mortgage industry is likely to recover, individuals are going to have a harder time of it.

And that is what the Democrats are proposing: more help for individuals.

One of the more sweeping bits of legislation proposed includes allowing the Federal Housing Administration to actually guarantee loans issued to help troubled homeowners refinance — to the tune of between $300 and $400 billion. The thinking goes like this: The government is already committing billions to bail out Bear Stearns and offer preferential terms to other financial institutions. Why not help the American people with their own taxpayer dollars?

The International Herald Tribune summarizes some of the other plans that have been floated as ways to alleviate the mortgage market mess:

Other ideas pushed by Democrats include letting bankruptcy judges rewrite the terms of distressed mortgages and providing federal grants to help communities with large numbers of foreclosed properties.

But, like yesterday’s proposals, the Democrats’ ideas will take time to implement, since they have to be agreed on in Congress. Plus, most of the ideas favored by the Democrats don’t have the same support in the mortgage industry as the Bush Administration proposals.

In any case, such short term mortgage mess fix ideas probably won’t help in the long run. Even if laws are changed to guarantee more oversight of States’ loan origination processes, or even if bankruptcy judges were offered more leeway in home mortgage loan restructuring, lasting changes will only be made when the American people look at lending differently.

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