The bad mortgages that contributed strongly to the current financial crisis have produced a horrible wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won’t help to create an economic recovery.

The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help financially stressed homeowners. But with 1 million residences having fallen into foreclosure since 2006, and an additional 5.9 million expected over the next four years, the Obama plan — whatever its details — can’t possibly do the job by itself. Lenders and investors will have to acknowledge huge losses and figure out how to keep recession-plagued borrowers making at least some monthly payments. (more…)