Private Mortgages

In a time where bank credit has dried up and where people have reason to fear about the values of their mutual funds, would it not be logical for private investors to start writing mortgages?

I.e. instead of getting a few measly percents return or no return at tall, why not finance someone's house i.e. at 70 LTV and get 7-12 percent return? Of course you would have to do due diligence on the value of the home and credit worthiness of the buyer.

This type of investment would be a lot safer because
- it is transparent
- it is simple
- is is a lot more lucrative than many bonds, cds etc.
- you got recourse: you receive mortgage payments every month, and if the borrower ever defaults, you foreclose and get a property with additional 30% equity

Here is a link that explains the system graphically

http://www.invest4real.biz/financialmarket.html

What do you think about the idea? This is private lending, without bank fees and as the investor you put your money into main street, not wall street.