If I told you that one-half of 1 percent of the homes in a given area were in foreclosure, would that make you think that the area was in serious trouble, that there were real problems there? Well, ½ of 1 percent is the foreclosure rate in the state of Nevada, which currently has the highest foreclosure rate in the nation. We need to keep some perspective here.

Nonetheless, it is true that the number of foreclosure filings, nationwide, in July was nearly double that of a year ago. There have been hundreds of thousands of filings, and surely there are more to come. Some estimate that there will be upward of 1 million foreclosures over the next couple of years. That's a lot of pain, and I don't mean to belittle it.

In the face of these numbers, a variety of people have advocated that government must do something. Unsurprisingly, presidential aspirants have raised this issue. Senators Clinton, Obama, and Dodd have already weighed in, with Senator Dodd, Chairman of the Senate Banking Committee, making specific proposals of actions that might be taken by Fannie Mae and Freddie Mac.

More notable, because it came from an unexpected quarter, Bill Gross, a founder of the PIMCO investment firm and a columnist for Fortune, urged President Bush to take action to rescue American homeowners who were facing foreclosure. "If we can bail out Chrysler, why can't we support the American homeowner?" Gross wrote. He urged the President to "write some checks, bail 'em out, prevent a destructive housing deflation … ." We have to assume here that Gross was motivated primarily by concern for unfortunate homeowners, rather than for unfortunate funds that had invested heavily in mortgage-backed securities.

Any discussion of a bailout needs to take into account the varieties of circumstances that have led up to the rising foreclosure rate we have today. There are at least three groups of persons who are, or soon may be, facing foreclosures. These groups are not exclusive. That is, a single person might belong to more than one of them.

First, there are those who can't make their payments because they have encountered major, unexpected expenses or an unexpected loss of income. Health problems and job loss would be typical causative factors. This is a source of foreclosures in even "normal" times.

Secondly, there are those people who didn't understand what their loan payment obligations would become after "teaser" rates had expired, or scheduled increases kicked in. Many of these people failed to read and/or comprehend the loan documents that they had been given. Others were outright deceived by unscrupulous lenders.

Thirdly, there are persons who knowingly committed fraud when they made their loan applications. Some of these people were investor speculators who falsely stated that they intended to occupy the property they were purchasing. Others knowingly overstated their incomes and financial situations when they applied for loan programs that did not require documentation. Probably, in many cases, these people were told, "everyone does it."

When we think about these different groups of people who are facing foreclosure, we are liable to have differing sympathies with respect to bailout proposals. Whereas the first group is probably that for whom we would have the most sympathy, attention has primarily been focused on the second group. Good people can have honest disagreements as to how much forgiveness should be granted to those who got themselves into fixes they didn't understand.

No one, I imagine, will have a lot of sympathy for the third group. Any bailout proposal should provide for careful review of the documentation and/or statements that were supplied by borrowers when they made their loan applications.

Published: September 7, 2007

Use of this article without permission is a violation of federal copyright laws.

Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .