While Congress tries to patch together some kind of package to help people facing foreclosure without piling even more losses onto troubled lenders, the number of homeowners facing foreclosure is quietly rising. Fast.

According to a recent article in the New York Times, 2.6 million American homeowners were facing foreclosure when Congress first started crafting the bill, and six months later that number has already risen to over 3 million homeowners. By the time the package is finished and acceptable to all sides both politically and ideologically, by most estimates over 5 millions borrowers will be facing foreclosure. Even the most aggressive version of the package in Congress will help only a small number of those losing their homes.

The NYT article quotes Steve O’Connor, Senior Vice President of the Mortgage Banker’s Association, as saying, “There is no silver bullet. It will take multiple tools to turn the housing market around, and it’s going to take time.”

Ah, the elusive silver bullet. The silver bullet is in the same category as the magic wand, as in, “There’s no magic wand that can reduce gasoline prices in this economy,” or, “If I had a magic wand and could just fix [fill-in-the-blank here with any one of a couple dozen rapidly worsening social problems], I’d do it, but I don’t have a magic wand.”

Silver bullets are like magic wands, only more aggressive. Magic wands turn gas pumps into vases of daisies. Silver bullets kill werewolves. Werewolves tend to head up financial institutions and conservative think tanks, so of course they do not keep much of a supply of silver bullets on hand in those places.

But here’s the thing: We need some silver bullets, and we need them fast.

It isn’t a question anymore of ‘moral hazard’; that high-road conservative argument that wrongly reduces the whole problem to a handful of low-life, credit-card crazy poor people and greedy high-roller investors who bought themselves mini-mansions they weren’t entitled to own with money they weren’t entitled to borrow.

Financial institutions loaned out that money on terms that would have looked insane in Vegas, never mind inside mortgage lending. The lack of self-regulation in the mortgage industry at the height of the housing bubble was breathtaking, and the Mortgage Banker’s Association and its members surely know this better than anyone in or out of Congress.

What’s happening now, long before we are anywhere near the 5 million foreclosures we’re heading toward, is that whole cities are eroding, losing their tax bases as homes go vacant and formerly good neighborhoods watch their home values plummet. Formerly prosperous cities are having to cut back on essential services like police and firemen, school buses, and public transit.

As foreclosures increase, associated problems snowball out of control. Entire middle class neighborhoods in Cleveland are now destroyed, and many other Midwestern cities are rapidly following suit. It’s happening very fast, and as it happens jobs in construction and sales vanish, people are left homeless, and city and state governments are overwhelmed with social problems right at the very same time their resources for handling these problems are drying up.

So the truth is, we need a silver bullet. We need lots of silver bullets, and we needed them yesterday.

According to the NYT article:

“There is a precedent for such government endeavors, but not since the New Deal. In the 1930s, the government created the Home Owners Loan Corporation to buy mortgages and modify them. In three years, it bought a fifth of the country’s home loans,” said Alex J. Pollock, a resident fellow at the American Enterprise Institute in Washington.

Bankers get understandably skittish when anyone invokes the spirit of FDR, especially the weekend after the DOW falls 350 points in a single day and appears to be headed for more of the same. And yet, the consequences of a protracted philosophical debate on this issue could be much more disastrous than anyone in authority is admitting right now. Ordinary people get it. Mayors get it. Even governors get it.

We have the right to use the silver bullets now; the Supreme Court said so.

So let’s find some. Quick. Before it’s too late.

Related posts:

1. New Hope for Homeowners Facing Foreclosure
2. Wines and the Foreclosure Crisis (No, They Do Not Have Anything in Common)
3. Loan Modifications: Adding Salt to the Wound
4. Mortgage and Foreclosure Fraud Mushroom in the Wake of Housing Bubble
5. Foreclosure Homes of the Rich and Famous