Many people have asked me about the subprime mortgage crisis, so here's my opinion:
Most of the homeowners who are in trouble with their mortgage either (1) knowingly accepted the risk of an adjustable-rate, interest-only or payment-option mortgage so they could buy a more expensive home or (2) were the victims of fraud, often in form of repeated ill-advised refinancings urged upon them by mortgage brokers.
Those who knowingly took the risk need to suffer the consequences of their short-term thinking. They had the benefit of those super-cheap mortgages and now they need to either pay the going rate or get out of the homes they can't afford to own.
A government bailout would trigger an understandable backlash from homeowners who chose fixed-rate mortgages and renters who declined to accept the financial risk of the new mortgages. A bailout also would teach those who are in trouble (and their children) that there are no adverse consequences for their decisions, a false lesson indeed.
Those who were victimized should have the right to sue lenders and mortgages brokers who committed fraud. There should be an investigation into loan applications that included mysterious phantom income at closing when it was all but too late for the victims to walk away.
The difficulty is to figure out who acted knowingly, who experienced a genuine hardship deserving of assistance, and who was defrauded.