LET'S IGNORE CRY TO FREEZE INTEREST RATES.

Byline: GREGORY J. WILCOX

The call to freeze interest rates is fast becoming the rallying cry for Democratic presidential candidates.

Hillary Rodham Clinton is the latest to jump aboard. During a debate in Nevada last week, she called for an immediate five-year freeze on mortgage interest rates.

She also supports a three-month moratorium on foreclosures. Rival John Edwards wants a seven-year rate freeze. (Barack Obama is calling for better disclosure rules for lenders and, like his challengers, wants the government to help homeowners with painful loans get into better products.)

Help getting better loans and taking a timeout from foreclosure filings might be a good idea.

Freezing interest rates probably isn't, no matter what kind of loan a homeowner has.

Interest rates move in response to many stimuli -- too many for the government to lasso. And they are pretty much a private-sector affair. Those interest rates the candidates want to freeze are a revenue stream investors bet on.

"You would be getting a forced haircut on your investment from the government," said Keith T. Gumbinger, vice president of mortgage-rate tracker HSH Associates in Pompton Plains, N.J.

"This market is populated by private investors for the most part, private entities putting up money to be lent to other folks."

Fortune magazine senior writer Jon Birger offered this harsh assessment in an article that popped up on CNN.com: "Hillary Clinton is no dummy. Even her detractors know that. And yet in last night's Democratic presidential debate in Nevada, Clinton floated what is perhaps the dumbest solution to the current mortgage mess I've heard from a top presidential contender."

Birger, too, has no problem with a 90-day moratorium, though he says it will just postpone, rather than prevent, the inevitable.

In good times, the mortgage market gets funding from entities that control huge amounts of money -- big investment funds and pension and mutual funds, to name a few.

This is a bad time for all the players in the mortgage pool, and a rate freeze could make it worse.

"It certainly would not speed the recovery of the housing market," Doug Duncan, chief economist of the Mortgage Bankers Association, told Birger in the story. "The problem now is that investors are already worried about what the risks are, and (a rate freeze) would only widen risk premiums more."

(Duncan could not be reached to elaborate.)

The MBA also noted last week that the industry initiated more than 235,000 loan modifications and repayment plans in the third quarter.

There is another downside to an interest-rate freeze that's actually a pleasant surprise.

Long-term rates have been falling. And they could go lower.

"We're reasonably close to 44-year lows for fixed-rate mortgages," Gumbinger said.

Mortgage giant Freddic Mac said the rate on a 30-year fixed loan averaged 5.23percent in June 2003, its lowest point in the previous boom market.

For the week ending Jan. 17, the rate averaged 5.69percent, the lowest since July 2005 and the third straight weekly decline. A year ago, the long-term rate averaged 6.23percent.

In that rate report released Thursday, Frank Nothaft, Freddie Mac's vice president and chief economist, noted that shoppers scaled back spending last month.

And he said sales of building materials, garden equipment and materials at supply stores were particularly weak.

"The declines aggravated concerns about the well-being of the economy and exerted downward pressure on mortgage rates," Nothaft said.

There is a lot of conjecture that the economy is going to get worse, and recession is now a fashionable word.

Gumbinger also points out that whoever wins the presidency -- Democrat or Republican -- won't take office until a year from now.

"I think a year from now the problem in the American mortgage market is going to look drastically different than what we've seen so far," he said.

Who knows, maybe we're right on the cusp of another homebuying and refinancing opportunity.

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