Owning a home is a dream and goal of many people.  It is a big commitment and often takes many years of planning and saving, preparing for the opportunity.   Real estate is generally considered a good investment, making it appealing economically.  Because of the cost of most real estate, people rarely pay the full price up front.  They use leverage by borrowing most of the money and paying it back over many, many years.  
Real Estate loans used to be dependent on many criteria – a person’s income, work history, the home value, amount of down payment.  Lenders approved loans based on these things and their assessment of the borrowers ability to pay.  By using credit scores and income analysis people’s loans are categorized as prime or subprime.   Prime is assigned to someone who has good credit, high income and/or lots of cash for a down payment.  The term subprime is used for loans to people who have poor credit scores, less than stellar work history and/or little cash for a down payment etc.  There is always some risk to the lender because if a loan is not repaid they lose the money.  Subprime loans then, are riskier because the borrowers already have a record of not paying on time or not at all.  
A few years ago, for various reasons, the chairman of the Federal Reserve Board began to cut interest rates, which made borrowing money more advantageous.   Lending companies began to pop up everywhere.   Home builders started to build new tracts of houses on vacant land.  This created more jobs, which added strength to the economy.  Many other things contributed to economic growth as well.  As jobs increased and money became more available more people began to buy houses.  Some people bought houses to use as vacation homes or investment property, not just for their main living space. 
This created a real estate boom, which affected many areas of the economy.   People connected to construction companies, materials, land, building tools, furniture, utilities and many other entities benefited from the boom.   Great benefits seemed to go to the mortgage companies offering the loans.   Many companies began to change requirements for loans by reducing the standards and approving more and more people for loans that were considered subprime.  This added to the real estate boom because more people were buying houses than usual.  By creating more buyers, competition for houses increased and the price of houses began to go up faster than usual.  Of course this encouraged the builders to build more houses and the lenders to lend more money and the cycle began to intensify.  Unfortunately it also encouraged people to borrow more money than they would have qualified for in the past.  
Not only were more people borrowing more money, but more loans were also designed differently than had been common before.   Adjustable Rate Mortgages and Interest Only loans became popular especially with the subprime category.   These loans are not fixed, so the payment changes over time, sometimes increasing greatly from one reset time to the next.  The lure of profits caused lending companies to approve these riskier loans to even riskier subprime candidates.   This would prove to be a dangerous combination.
One more practice connected to these loans created another situation that many people were unaware of.  The trail of the real estate loans began to get more complicated years ago as lenders found ways to capture their profit from the loan, but pass on the risk.   It became common for lending institutions to sell loans to other banking or investment organizations.   These groups would buy the loans with the expectation of profit as the loans were paid off.  Sometimes the loans were sold again and again.  The practice has snowballed over the years until many investment organizations have acquired packages of these loans, including banks in other countries.   The combination of subprime borrowers, fluctuating loan payments and risky loans being spread out so far and wide created a perfect storm.   
As the years past and the interest rate on these loans began to reset people found their house payment going up drastically.   More and more people have been unable to pay their increasing house payment causing banks to foreclose on the homes.  Most banks can handle a certain number of foreclosures each year and accept that as part of doing business.   Recently because of the greater number of subprime loans and the increase in fluctuating payment plans, more and more people have been unable to pay their mortgage.   The number of foreclosures on property has been higher than at any other time in history.   Some authorities believe foreclosures are even greater than at the time of the depression in the 1930’s. It has also been reported that builders began working on fewer new houses in September than at any time in the past 14 years (Bawden).
When a foreclosure occurs the bank takes back the property and the loan is not repaid.  To get their money back the lending institution has to sell the house.  With a few foreclosures a year, this is not a problem.   But with the larger number of foreclosures and the prospect of another wave in the near future economic experts have become concerned. Ben Bernanke, chairman of the US Federal Reserve, says this will be a "significant drag" on the economy into next year as "conditions in mortgage markets remain difficult" (Bawden). "The ongoing housing correction is not ending as quickly as it might have appeared late last year” (Paulsen in Bawden).
The real estate boom that was feeding the economy has reversed and begun to become a drain on the economy instead.  Lenders are taking huge losses as more and more loans go unpaid.   Builders have lost money on homes that were built that are now not selling.   Other entities that were benefiting are now questioning how this slowdown will affect them.  Most of America has been enjoying the affects of economic growth.  There is concern that the “mortgage meltdown” will reduce jobs and bring on a recession. Some experts feel that  There is also the consequence of financial ruin for more banks and other institutions that invested in loans that will now not be repaid.  Even people who thought they were not connected in anyway have discovered that money they have in mutual funds, 401K’s and other retirement accounts has been exposed to these loans that are now worth nothing. 
As shock and then concern for the foreclosure problem has grown in the last year, government officials have had to look into its affects on the economy.  Many of them feel that some people were tricked into taking on loans that were not appropriate for them.  They want to help people keep their homes if possible.  Some think that if it is going to slow down the economy it will hurt everyone.  They want to prevent a recession and are willing to intervene financially to prevent this from occurring. 
The question of these bailouts by government creates controversy for many reasons.   If the government provides funds to individuals or to companies where do the funds come from?  Will they be paid back?  Ultimately do tax payers pick up the tab in the future by increased taxes?
	Another concern is described with the term “moral hazard”.  This is when people are rewarded for making poor choices.  In this case a bailout would reward borrowers for bad financial decisions.  It would reward banks for offering risky loans and it would relive some of the financial stress other groups have experienced from investing in these loan packages.  In other words no one would feel the consequences of their poor judgments.  
	If bailouts are not created the implications on the economy could be disastrous.  Some people think that we are already seeing the beginning of an economic slowdown directly related to the foreclosures.   Builders have had to lay off workers and companies like Home Depot are seeing reduced earnings.   If people lose jobs as companies close due to real estate slowdown they will in turn stop spending at other stores.   This could trigger more layoffs and increase the chance of a recession.  
Even the government will lose if houses are left empty.   There will be less property taxes paid into system and this will affect the cities and states.