The care and concern that erupted after Hurricane Katrina is beginning to give way to a harsh reality: A city of 460,000 people has been largely demolished and now comes the unromantic matter of figuring out who owes what to whom.

A review of various situations suggests that thousands of housing units will be renovated -- and thousands more will be bulldozed.

The Bureau of Labor Statistics reports that "about 900,000 persons age 16 and over had evacuated from where they were living in August due to Hurricane Katrina." Given that people 16 and younger are a substantial part of the population, it's obvious that far more than a million people were displaced by Katrina, Rita and Wilma. Media reports also suggest that an estimated 600,000 jobs have been lost.

A hardhearted bean-counter could look at the displacement and unemployment figures and say that it's not much within the context of a nation of almost 300 million people. But the loss of a home and a job is a terrible thing, and many will now face foreclosure and bankruptcy as well.

As a nation we can do better than this.

We know that some portion of the homes in the impacted Gulf Coast areas experienced minimal physical impact. If the owners of these homes are now jobless it can be expected that many such properties will be sold and that the owners will re-settle to other communities where employment is available.

We also know that some percentage of homes are potentially habitable. To re-build will require funds and to get funds will require income. The FHA has been the first federal agency to sensibly address this issue with its Mortgage Assistance Initiative . This program essentially defers a year's worth of mortgage payments, giving owners time to re-build, keeping foreclosures off lender books and creating job opportunities in the very heart of devastated areas.

The estates of those with mortgage life insurance who perished in the storms will likely be entitled to payments equal to remaining mortgage balances. Such coverage will be valued by heirs and will allow them to re-build. However, there is no rule which says homes must be re-built -- the properties could just as easily be sold at a huge discount.

Those with unemployment insurance may well get mortgage coverage for as much as a year -- but such insurance typically takes several months to kick in and is unavailable to the self-employed. Some policies cover just principal and interest payments while others also include insurance and property taxes. In the best case, unemployment insurance will give hurricane victims a grace period to recover.

Flood insurance is required for any financed property built on a flood plain and it should be obtained for mortgage-free properties as well. Flood insurance will cover a large number of properties, but not all. In many cases, however, coverage will be insufficient to allow re-building, which means owners will need additional financing or savings withdrawals if they are to return. Unfortunately, many individuals in the flood areas do not have the financial capacity to rebuild, even with flood insurance coverage.

Private mortgage insurance (MI) is designed to protect lenders in the event of borrower default -- but not all defaults. MI master agreements require that for lenders to obtain payment the home must be in its original condition minus normal wear and tear. In no case is a hurricane damage regarded as normal wear and tear.

The VA loan program will cover up to 25 percent of the value of the loan in the event of borrower default. For borrowers the question then becomes whether the remaining property value is sufficient to pay off the debt. If not, it's possible that veterans could still owe big sums even with VA coverage. However, the VA -- like FHA -- is well-known for being pro-borrower and you can bet the VA will work out a program to increase borrower options.

There are also, of course, people who own their homes free and clear of all debt. If their properties have been destroyed, however, they will now need financing to rebuild. Whether large numbers of them will want to rebuild in areas hit by the hurricane is unknown.

The bottom line is this: There are thousands of properties which will be restored. A large portion of the restoration process can occur under programs which now exist or are being developed. However, there are also thousands of properties which will not be restored. It may be that these properties will be sold for the value of the underlying land -- but will the value of the underlying land be sufficient to repay lenders? If not, we will see a massive number of foreclosures and bankruptcies in the coming year -- and huge lender losses.

What can be done? We certainly need to help those with a direct stake in the re-building process -- those who need homes and jobs. It may be that to clear the books and avoid a widespread financial catastrophe the federal government will need to form some sort of entity -- say the "Gulf Shoreline Development Agency" which will buy residential and commercial real estate devastated by the hurricanes.

The money would be used to pay off all mortgage, auto and credit card debt.

In other words, in exchange for a fresh financial start for homeowners the federal government would end up owning a large portion of the real estate which now exists in the Gulf Coast areas of Louisiana and Mississippi. The land could be redeveloped and sold to pay for the program, held as park land, or set aside for environmental purposes.

But -- let's be realistic -- much of the land acquired by the government will never be re-developed for the simple reason that protection against massive hurricanes is increasingly implausible. The idea that this program will somehow pay for itself is implausible.

Participating creditors under the program would be made whole, or close to whole -- a better option than foreclosing on properties which may be impossible to sell for a realistic value or which might actually create new liabilities because of environmental concerns.

The cost will be enormous. But the cost will be enormous if large numbers of foreclosures are required and if hundreds of thousands of households and businesses are bankrupted -- including some very large businesses with huge numbers of shareholders.

We need to think about what happens when the foreclosure moratoriums end and lenders must ultimately seek the return of their money. There are no easy or perfect answers to the problems created by the hurricanes of 2005, but at least our national policy should be to limit damage to the extent possible.

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