Foreclosed

85,000 American families lost their homes last month. That's a 25 percent increase year-over-year. While everyone on Capitol Hill is freaking out about about struggling industries and wanting to bail them out, if you look collectively at the impact of 85,000 foreclosures, the numbers are just as high. The conservative estimate is that every foreclosure costs $250,000 to the greater economy. So that's $21 BILLION dollars of economic impact in just the last month. Spread it over a year and you've got as much money as has been handed out thus far in the TARP program.

And this won't end by itself. 1 out of every 452 homes in the country received a foreclosure filing in the last month. So something must be done. This past week, HUD announced a new program to help homeowners, or actually an old program for which more people can qualify, but critics contend that it's not enough:

The plan announced Tuesday by federal officials and mortgage giants Fannie Mae and Freddie Mac sounds sweeping in its approach: Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.

But there's a catch. The plan focuses on loans Fannie and Freddie own or guarantee. They are the dominant players in the U.S. mortgage market but represent only 20 percent of delinquent loans.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages."

With the government spending billions to aid distressed banks, "we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans," Bair said in a statement.

Sheila Bair is absolutely right. And if foreclosures go unchecked, it will put a hole in the economy that no amount of stimulus can fix. Both states and big banks are either talking about or instituting foreclosure moratoriums. We need one at the federal level.