The answer can not be that California and Florida have lots of second home properties abandoned by speculative buyers when the hope of quick capital gain disappeared.  Maine has the biggest share of second homes among all states but had only 244 foreclosed homes for sale, about 1/10th of the foreclosed home to housing stock ratio as in California.

Neither can the answer be that the four relatively poor states had very few new homes built in 2004-06, the vintage of a large share of the foreclosed mortgages. St. Louis (561) and Suffolk County Massachusetts (801) – mostly Boston – had virtually no open space for new homes so their foreclosures are predominately existing homes. Both of these totals are more than Iowa (443), Alabama (520) and many other states with far larger populations.

Also, the answer seems to have little to do with the loss of a job which can often prompt a foreclosure. Florida has less than twice as many people as Michigan but three times more foreclosed homes for sale even though the Florida unemployment rate (5.5%) is far below the jobless rate in Michigan (.5%).

If the answer can not be found in hard economic data, perhaps a difference in attitudes about personal financial responsibility between regions can explain the vast differences in foreclosed homes for sales in various states. Did households in California, Arizona, Nevada and Florida take on a bigger financial obligation than they could realistically hope to carry?

We have all seen enough of these mortgage contracts gone bad to know that this is exactly what happened.  Both the lender and the borrower were irresponsible with little concern about who would have to cover their loss.  We now know who is covering these mortgage losses.  It is all of us through higher taxes to rescue the financial system and also lower earnings for all of us in a depressed economy.

The recent “fix” by Congress for the mortgage mess is only a band-aid because it failed to make it clear that financial irresponsibility is not acceptable behavior. Sure, Congress toughed enforcement on outright fraud, behavior that has long been illegal.  But Congress excused people who took too big a mortgage.  “It is not your fault”, said the Congress.  “We will force your lender to write down the outstanding principal to below market value and give you a low rate, government insured, fixed rate mortgage.” Congress excused the lenders by providing $4 billion to states to buy foreclosed homes from them that they otherwise would have trouble selling.

It may be a generation, but we are doomed to repeat the subprime mortgage crisis because the message from Washington is you can gamble with other people’s money and if you get trapped in a declining market Uncle Sam will bail you out.

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