Homeowners facing foreclosure, and those trying to prevent foreclosures with short sales, need fairness and compassion from lenders. The housing market is still in a depressed state, as home prices are expected to improve very little in 2012.

Too many Americans have lost their homes in the last five years. Since early 2007, nearly four million families have had their homes go into foreclosure. For most of these families, the American dream has also been foreclosed on.

Following the housing market decline, companies saw sales plummet and credit tighten up. Some firms cut back on employees, and others went out of business. Many homeowners who lost their jobs could no longer afford to pay their mortgage bills.

Home prices and values declined as the economy took a nose dive. Many home values went “under water,” meaning that the value of the home became less than the amount that was still owed on the mortgage. It was not unusual for owners to see the expected value of their properties decline 30 to 40 percent. Most of these homeowners could neither borrow nor afford to sell their homes, when the properties were worth less than their mortgages remaining to be paid.

A housing foreclosure takes place when a mortgage lender seizes a property from a delinquent borrower, who has stopped making mortgage payments owed to the lender. Lenders take homes or multi-housing units back from borrowers in lieu of non-payments on collateralized real estate. The lenders want to sell those properties to get their money back. Houses that have been foreclosed on are usually sold at auction to the highest bidder.

Banks and other lenders don’t always have to foreclose on a property to get most of their money returned. They can allow the owner to have a short sale. A short sale is when the lender (usually a bank) agrees to take less than the total amount of monies due on the remaining mortgage amount. The lender must approve and agree to the amount of the sale price; otherwise, the homeowner could still be responsible to pay the difference owed. Even after a buyer is found, it often takes considerable time for settlement on the home to take place.

For example, take an owner who bought a home for $375,000 in 2005, and still owes $280,000 on his mortgage. If the home can sell now for only $235,000, the owner would lose the $75,000 he gave for the down payment, and still owe $55,000 to the lender. In a short sale, the lender agrees to forfeit some of what is still owed to allow a sale to be made.

Lenders can also look carefully at the situation of the homeowner, such as if the person is likely to be able to pay off the debt over time. They can give the owner more time to make payments, or renegotiate the mortgage terms so that lower payments can be made over a longer period of time.

After all, one reason for the mortgage crisis is that lenders did a poor job of checking credit, and many people were encouraged to buy homes that cost more than they could afford. And some foreclosures involved sloppy record keeping and possibly fraud, because they were based on forged or unreviewed documents, according to the New York Times. More than 40 states attorneys general have begun investigations into foreclosure abuse.

Partially, as a result, government authorities recently agreed to a $26 billion settlement with five of the nation’s biggest banks, that could provide relief to nearly two million current and former homeowners.

Families who have experienced housing foreclosures and short sales know the road will be tough to come back, especially with poor credit backgrounds to overcome. It helps that there has been a positive upturn in the housing market this spring, but the Kiplinger Letter, a weekly business and economic forecasting periodical, states that it will be modest. Many housing experts believe it will take almost a decade, before housing ownership is back to normal.

One solution to the housing problem lies in our rental housing market. For those who can’t buy, rental is a reasonable alternative. Our government should help needy families who have lost their homes by providing tax relief and other incentives for renters. Our federal government should take this responsibility because its housing policies and housing agencies helped to create the mortgage problems that we are now working so hard to overcome.

— Bernard Featherman is a business columnist for the Journal Tribune and former president of the Biddeford-Saco Chamber of Commerce.