According to a recent study, Detroit had one the three highest foreclosure rates among the nation’s 100 largest metropolitan areas during the first six months of this year. Detroit’s woes–one foreclosure filing for every 29 households–ranks it second in the nation. The metro area, comprised of Wayne County, reported 28,705 foreclosure filings, which translates into a 26 percent increase from the previous six-month period and nearly double the number reported in the first six months of 2006.

If you are one of the many Michigan residents caught up in this subprime lending/foreclosure mess of ours, this blog entry may interest (no pun intended) you.

First though, a little background information: Subprime lending is highly controversial. Opponents say that the subprime lending companies engage in predatory lending practices such as deliberately lending to borrowers who could never meet the terms of their loans, thus leading to default, seizure of collateral, and foreclosure. Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.

The controversy surrounding subprime lending has expanded as the result of an ongoing lending and credit crisis both in the subprime industry and in the greater financial markets. This phenomenon has been described as a financial disease which has led to a restriction on the availability of credit in a number of financial markets. Hundreds of thousands of borrowers have been forced to default and several major subprime lenders have filed for bankruptcy.

Well, last Friday, in a widely publicized address from the Rose Garden, President Bush said that a bailout is out of the question: “A federal bailout of lenders would only encourage a recurrence of the problem.” This is certainly true. Bailing out the lenders would simply lay the burden on taxpayers and provide the carpetbaggers with another opportunity to pillage.

The President did reach out to some distressed homeowners–those with good credit histories who could probably pull themselves out of their current crises with a little help from the federal government. The FHA (Federal Housing Authority) will be given more flexibility to assist homeowners who have subprime mortgages. Homeowners may also be spared having to pay additional taxes in the event that the lender forgives a portion of their debt. Perhaps this will encourage lenders to work out reasonable solutions with homeowners.

Nevertheless, what about all the other consumers–what about hard-working American families who are too deep in debt to be saved? What about the children of these people who are going to be uprooted from their neighborhoods and the school districts where all their friends go?

Government officials, lenders, and people who have not been victimized by the shoddy lending practices of the last decade are quick to judge. After all, they are not the ones paying the price. The people who are suffering are the same people who usually suffer in these situations–consumers. These are the people who were sold ARMs (adjustable-rate mortgages) that ended up costing an arm and a leg. They were told that they could refinance before the rates went up or could build higher credit scores by making their payments on time and then refinance with a low interest rate mortgage later.

Then, the bottom dropped out of the housing market, making it nearly impossible for these hard-hit homeowners to refinance. Some of these loans even came with stiff prepayment penalties to further discourage people from refinancing. These folks were led down this path simply because they trusted an “expert” in a fancy suit with a silver tongue who failed to warn them of the looming trouble and the risk they were taking on. Where are these smooth talkers now? Probably out of work and seeking more fertile fields to ply their trade. They turned the American Dream of Homeownership into a nightmare, but they certainly are not the ones having to wake up to it.

Instead of letting them off the hook, they should be forced to take ownership of the problem they created. Instead of waiting around to see whether the federal government is going to bail them out, they should be actively pursuing the homeowners they led astray and offer them real solutions that can help these distressed homeowners regain their financial footing.