Human Nature, Ice Cream and Mortgage Modifications

Two articles caught my eye in the NY Times over the weekend, in betweem July 4 celebrations here in Cambridge MA. Richard Thaler's commentary that the US government's proposal will give consumers a  two ice cream approach for mortgages (vanilla = 30 year fixed, no toppings) and the more closely regulated but more complicated "rocky road" varieties.  

And Gretchen Morgenson's article on the very high cost of foreclosures, and the relatively puny volume of loan modifications. No answers from either writer but it occurs to me that human nature plays into it, at our July 4th picnic with a stars and strips cake and optional ice cream, every one went for the fancy ice cream. I ate my star (I think it was Tenesee) with a scoop of rum raisin. The vanilla was largely untouched by the group. And as for loan modifications, my 10 year old was selling patriotic beadwork to people streaming by the house carrying canoes and kayacks and lawn chairs down to the Charles River to watch the fireworks.  She was thrilled with the results of her entrepreneurship but was in frank denial that that the cost of goods should be deducted from the profits, just as the loan holders are loathe to "modify" the principal to take into account the reality of comparatively high cost of foreclosure. A smart process that can take into account human nature, simplify the complex, and show us that change is good is surely needed here.