U.S. Treasury Secretary Henry Paulson is urging Congress to pass pending legislation (subscription required) that would amount to a "bailout" of subprime borrowers. He argues that the mortgage problem has negatively affected the economy, and this will help stop the bleeding.

The proposed legislation would freeze interest rates on certain adjustable rate mortgages (ARMs). So instead of rates increasing under the original terms of the mortgages, some borrowers would receive protection and would not see their interest rates rise.

Sounds great, doesn't it? Well we need to go back to the origins of the subprime mortgage crisis to see. The heart of the problem combines:

• High default rates - consumers who didn't pay their mortgages
• A depressed housing market - houses aren't selling for as much as they used to, and so a sale of a house might not even cover the full mortgage
• Rising interest rates – catching those with adjustable rates sometimes by surprise as their rate goes up and their monthly payment skyrockets
  

Many say that at the above issues are the result of irresponsible consumers. People bought more house than they could afford, didn't pay attention to what might happen if interest rates go up, or were irresponsible with their use of credit. And now the government wants to freeze interest rates to help them out of their own mess?

Why should consumers not be responsible for their own choices? Why should the government mandate that they be saved from themselves with frozen interest rates? What about all the consumers who waited to buy houses or who bought smaller homes because they wanted to make sure they could pay their mortgages on time? Why aren't they getting a break on their mortgages, especially when they've been more responsible?

Others contend that this action is necessary to stabilize the economy and to protect those consumers who might have been persuaded to enter into mortgages that really weren't in their best interest. They say predatory lending may be to blame for a big part of the subprime mortgage crisis, and that action by the government is necessary to right this wrong.

I say leave the mortgages alone. If consumers were lied to or defrauded in the mortgage lending process and this has caused them financial harm, there are legal remedies available to them and they should pursue them. Otherwise, consumers need to take responsibility for their own actions and figure out a way to pay their debts without assistance from our government.

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.