In response to all these comments - first of all, many of the people who bought using ARM loans expected that their income would go up when the mortgage adjusted upwards. Optimistic? Yes, but in inflationary times, this has happened. Secondly, renters don't pay PROPERTY taxes which help to keep our schools afloat. Do schools waste money? Some do and some don't - but ALL are being hurt by this crunch.

I have a hard time seeing how lowered prices - and the lowering of an entire industry will put our investment dollars to better use. Care to enlighten me?

Brenda: Greedy Realtors, what about aggressive mortgage brokers, lack of oversight on mortgage backed securities and a little personal responsibility on the part of the people who took out these loans knowing that they would eventually reset. I mean WTF why is it people like to throw stones at the agents who were working with people who wanted a home. That comment is just f*&cking rediculous.

What's wrong with the number of renters vs home owners continuing to increase? If you look at graphs of home ownership percentages, you'll see that the bubble years coincided with a marked increase in the percentage. Perhaps the blunt reality is that many people bought homes that they simply were financially unprepared for?

Btw, rental properties pay taxes too!

The local gov'ts will need to learn how to live within their means like the rest of us. There's no reason that budgets for even relatively conservatively run towns like San Leandro needed to double over the past 10 years when population went up a grand 2% total over that same timeframe. Less property taxes? Fine.

Don't get me started on wasted school funding.

As for people losing their homes because of "duping," again, that's hard, but plenty of people lost $$billions due to crooked stock brokers in the late '90's, yet never got a dime in recompense.

Ultimately, lower prices will help re-align our economy by putting investment dollars to more productive uses than importing a bunch of granite from China and Brazil. Furthermore, lower prices in California will help our economy by making it more attractive for employers and employees. It's impossible to "sell" California to, say, a company currently in North Carolina, Colorado, or heck, even Massachusetts given our current cost of living AND tax burden.

If nothing is done to help people to stay in their homes, the number of renters vs home owners will continue to increase. Much needed tax dollars for our schools and local governments will continue to decline. Perhaps we cannot completely stop the whirlwind, but we can help to ease its fury.

The reality is that until prices revert to historic norms versus incomes/rents, the market is unlikely to recover. Quite simply, new buyers in the market can't afford current prices. Imo, all these schemes will fail - and prolong the pain - because they ignore that reality and attempt to prop up prices and keep people in their homes that they really would be better off being foreclosed on.

Yes, but what about the people who were duped into believing they COULD afford these homes by greedy realtors who are now losing them? FHA could help many of them refinance. New buyers still have to cough up 3%, and with rising gas and food prices, the traditional 20% would take many buyers into retirement before the down could be saved. We need to incentivize inventory reductions, and quickly, to save our economy.

And I don't think this was just a leap to "do something" in an election year. This situation was critical, and something had to be done.

To afford payments on a Mortgage of $625,000, plus property taxes, a buyer really should have an income of more than $150,000. 2006 median family income in San Jose was only $83,000.

Prices for homes ARE dropping back to an affordable range as buyers can no longer indulge in short sighted bidding wars. Limiting loans to those who have the discipline to save a down payment will both reward them, and prevent another foreclosure disaster.

If you're buying a $1M house, I don't feel too sorry for you if you have to pony up another $100K to get that "jumbo conforming" loan limit.

I suspect this will add to the pressure on overpriced 'hoods where the prices really should not be $1M, i.e. Sunnyvale (flat, boring, why should a 2/1 1958 rancher be $1M???)

The fact that deomcrats and republicans could work together on something is probably a bad sign. The rush to do "something" in an election year is probably going to be regretted by each and every taxpayer down the road. And the last time we saw such unanimity on a major issue? The vote the authorize the war in Iraq...