Larry, included in that goofy rebate package Kyl plans to vote against is an even goofier proposal to allow the Federal Housing Administration, Freddie Mac and Fannie Mae to insure larger mortgages. This long post at Calculated Risk helps explain why this is such a horrible idea:
The administration is currently pushing for increasing the FHA loan amounts and the FHA maximum LTV up to 100%. This is not likely to remove the incentive to take another reckless loan on a still-too-high-priced house. If we aren’t going to ration credit with tighter guidelines and loan limits, then it will have to be rationed with pricing: eventually the models will “solve” the problem by increasing the costs of mortgage credit.
The whole post is a bit of a slog, but worth reading in full if you want a better understanding of the trends behind rising foreclosure rates.