The US federal government has tried to stabilise residential real estate, but nationwide prices have dropped by 13 per cent in the past 12 months. Analysts have forecast that by June 30, 10.6m families will have either no equity in their homes or a negative equity.

This problem seems likely to become more severe. The solutions proposed so far have been directed mainly towards helping delinquent borrowers avoid foreclosure, but the incentives have been weak. Remedies are needed to reduce delinquent mortgages to present property values, provide lenders with possible future recovery of the amounts by which they discounted their loans, restore mortgage lender liquidity and make mortgages available for future home buyers.