If we just let the lenders fail (as we should, IMHO), then they will have learned a most valuable lesson: don’t lend money to people who can’t pay it back, AND know the value of the collateral backing the loan.
It really is that simple. We (the taxpayers) don’t need to do a thing.
Mortgages are secured loans. If the borrower doesn’t pay, then the lender has the right to foreclose. That’s what’s supposed to protect them in the event of a default.
While I agree with you that a borrower should be expected to pay back a loan, it was the lenders who willingly and knowingly volunteered to lend money to people who were unlikely to pay it back. The onus is on the lender to evaluate the borrower and collateral and weigh the risks. The borrowers would not take loans they couldn’t pay back if the lender didn’t make those loans available (even push those loans through incessant advertising pitches targeted directly at the least informed borrowers) in the first place.
