Abstract: Foreclosures are at their highest in 50 years but there is little point in appointing blame if we cannot come up with a concrete, immediate solution.

It is human nature to look for a scapegoat the moment things begin to go wrong and the current situation with the foreclosure market in the US real estate scene is no different. The results coming in from different lenders across every state in the US indicate that foreclosures are at an all-time high.

Certainly this century has also been one for records in the real estate market with home prices setting records for many consecutive months and the number of home owners, in itself, reaching a record high, so it is not that surprising that foreclosures, the flip side of the heady home ownership coin, are also breaking records.

This does not answer the question who is to blame though. Let’s examine the equation a little more closely. Lenders, who are at their most efficient and profitable when they are lending money and receiving payments, are, generally speaking, reluctant to foreclosure on a property and take ownership unless they are getting nervous that the home owner can no longer make payments and delay is going to result in further losses for the lender.

Homeowners have been leveraging their house equity and ability to readily borrow money for the last decade now so it comes as little surprise that quite a few of them in the sub-prime mortgage market find themselves over-stretched.

The Federal Reserve Bank has been trying to curb spending and inflation in the economy through the longest period of interest rate hikes this century, they have, seemingly, succeeded but have managed to over-expose those borrowers who had borrowed to the hilt in order to buy a property.

In the blame game it would be easy to start with the borrowers who keep on borrowing and cannot stop spending, take lenders in our stride, particularly as it is becoming increasingly obvious that mane have been sailing a little too close to the wind for comfort when it comes to the transparency of charges in the loans they were offering to borrowers and end up with the Federal Reserve intent on keeping the economy from overheating at any cost.

None of this would serve to undo what has been done. What is important now is how do we make sure the real estate market does not suffer and foreclosures do not exceed the norm?

President Bush and members  of Congress have appealed to the mortgage industry to lower rates, and the industry says it is working with struggling homeowners. Now, the top prosecutors in 37 states are putting more direct pressure on lenders to open communication lines and not force foreclosure on struggling homeowners. The trick here is on communication and flexibility.

If lenders manage to keep their nerve and not force foreclosures in fear of losing even more money as the real estate market slumps and house prices drop then all this is but a blimp as we head towards the golden promise of a 21st century where house equity and house prices keep on growing at a steady rate.

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