Over the past year, federal and state governments, consumer groups, industry and others have worked to contain the growing tide of foreclosures. While some success has been achieved, foreclosures continue to mount and delinquency rates for subprime and even some prime mortgages have risen dramatically.

The US housing market needed to adjust after an unsustainable expansion. However, the lax lending of recent years has distorted this natural cycle. The existence of too many unaffordable mortgages has created a cycle of declining home prices and limited refinancing options that has contributed to more defaults, foreclosures and the ballooning of housing stock. This in turn has led to further home price declines. Government efforts should focus on helping the market reach equilibrium without overshooting.