The Home Foreclosure Mess

The top three states in home foreclosures are California, Florida and Ohio.  In California and Florida there was a spike in real estate values that attracted speculators, many of whom were flippers.  The speculators who took risks and lost do not deserve much sympathy.  In Ohio, however, the housing market did not show substantial price spikes.  The situation is very different.  Those losing their homes were cause by rising unemployment rates in their income sectors and by the false hope (lured by low teaser initial rates) that many in the lower income sectors could afford homes that were beyond their means.  Should government money bail them out? Should the government force "renegotiation of rates" (should SIV trustees be prohibited from foreclosing)? The argument is more complicated.  One has to balance long-term injury to the home lending market (caused by disabling execution on loan; loans with be more expensive in the future and less available to lower income earners) with short-term relief for those who are facing the lose of their homes.  The moral questions are much tougher.  Since the government, if empowered will probably make a mess of things, I would let the market clear on its own.