I've recently focused on figuring out how did this subprime mess happen and who is to blame. There's always someone who drops the ball. Or someones. Enough of that. Let's see if we can find a workable solution for it.
Prominent politicians are strongly vouching for the notion that the government, federal and state, should step in to stave off the expected homeowner foreclosure increase. According to their calculations it's the right thing to say to garner voter support. Many consumer advocates call for the same medicine. Maybe it is what should be done.
However, as of right now, the mood in the government is lukewarm at best toward a bailout. That might actually lead to a viable solution. That and the looming threat of a rash of foreclosures just could drive the banking community to sit down with homeowners and renegotiate mortgages that otherwise could turn up bad. This would make them own up to their lax underwriting practices of the past and in the long term help them improve their tarnished image. Act responsibly and reap the benefits of that noble quality.
What about the borrower? To renegotiate all non-performing loans would be impossible. The answer might be to concentrate on families with children earning modest incomes and the elderly. The rest would be best served with upfront credit counseling. Cut off the daily latte at Starbucks, just say no to the weekly round of golf, tighten your belt for the time being as needed, learn to become a responsible borrower.
These are the two principals and they should work it out.