I saw this morning that President Bush outlined a plan to reform the subprime mortgage industry and outline plans to help “Americans keep their homes.” I have been very interested to watch this whole real estate mess play out over the last year.

I have read so many stories about individuals caught up in the mess. Here is a typical story: One couple lied about their income, did not document it, and received a big interest only loan that will reset in a few months. Now they are scared as they cannot afford the revised payments and will lose the house. They said that when they purchased the house they figured they could refinance or their income would go up or the house value would go up – none of which occurred. They blamed the mortgage broker for lying to them about house values going up and did not appear to take any responsibility for the mess. This is typical of the many stories I have heard. It is sad to hear about people who have waited for years to buy a house only to lose it and I have no doubts there are a lot of sleezy mortgage brokers out there who will lie, cheat and steal to sell a mortgage. I have experienced the foreclosure process a few times firsthand growing up as a child (my family lived in 20+ homes in my 12 years of school through High School).

The challenging part for me is to figure out what the government’s responsibility should be in these cases. Should the Government bail out these homeowners or let the market figure things out? If the Government acts to help these people in some way, it would cost untold of billions of dollars that eventually end up as a subsidy to big banks. I also realize that these people are in their respective situations because of the choice they made to buy the house under unrealistic scenarios. What would Gospel Principles advocate? This gets sticky for me as we are told to show mercy, but yet let people suffer the consequences for their actions. So I am left in this push-pull, not really sure what the right answer is, besides fix the underlying problems in the system so this won’t happen again. (although I do lean to let the market figure things out)