Home Foreclosures: What was the Cause? What is the Effect?

Just saw another article which details a report telling some of the History of the recent dearth of foreclosures we have been experiencing. You can read it the article in Investors Business Daily.  

The time from the days when you made a 25% down payment, went to your local bank and applied for a 75 percent, maybe 80 percent loan, from that bank to complete the purchase of that home to a time 5 years ago when you not only could make NO Down Payment but even have the Seller pay all your closing costs, points and prepaids and the local mortgage group sold that loan to an investor has not been that long.

What has been the good that was done?  In the short term home ownership in this great nation increased to historical high's. Where homeownership had fallen prior to 1995, especially among blacks, very low-income families with children and hispanics, there has been until recently a tremendous increase in the percent of those people who were able to become homeowners.  

This should be a good thing. Homeownership promotes stability, thrift, the children have better self esteem, parents have better self esteem, the value of homes in the community increases, etc. All these things are good both for the community and for the individual.

There is however a down side. When underwriting standards were lowered, when there was no down payment and the credit quality of the borrower was less important, a new factor was inserted into the mix. This may have been too easy. Perhaps instead of stability and thrift there is a feeling of euphoria that may lead to purchasing things that are not really affordable, What would this do to the family? What if someone became seriously ill? What if there was a temporary job lay-off or heaven forbid, job loss. Oops! Where is the next payment coming from?

Now many of those borrowers (homeowners) that were helped by the federal housing policies have for various reasons (I'm not willing to say "been forced") become delinquent or gone into foreclosure. The asset base is destroyed, their credit is destroyed, many of the "possessions that were so important" are lost and in many cases the damage it does to the family, the children is devasting. My heart cries every time I show one of these homes where I see the remains of a families homeownership experience. What does our government do when it taes away the incentive for its people to work and earn and grow? I welcome your response.