The real estate bubble, driven in part by aggressive lenders and loosened financial standards, has burst.

Much like the dot-com speculation on Wall Street nearly a decade ago, steadily rising real estate prices finally gave way to reality. Many people will be hurt by the crisis, but not all the consequences of the bubble bursting are bad.

In addressing the so-called subprime mortgage crisis late last week, President George Bush focused on two groups of people caught up in the slumping real estate market — honest, low-income home owners, many of whom deserve some help to prevent them from losing their homes, and speculators, who do not warrant federal assistance.

The Bush plan appropriately proposes limited financial assistance and repayment flexibility for some struggling homeowners.The president also urged greater transparency in lending so that low-income people are less vulnerable to aggressive lenders with lax standards and complicated loan agreements that often hide risks and balloon-payment information in pages of hard-to-understand documents. Bush also said that no federal bailout is warranted for speculators who expected easy profits, assuming that real estate prices would escalate forever.

The collapse of the latest investment speculation is complicated by the fact that homes are not only investments, but they also are places where people live. Bush is proposing some help for many strapped homeowners and he also suggests that lenders should offer flexibility to ease the impact of rising interest rates on people who, until recently, kept up with their payments.

Surging forecloses are being felt in many parts of the country, but the epicenters for mortgage delinquencies are in parts of the country dominated by investor properties, according to an official with the Mortgage Bankers Association. That makes sense, because increasingly loose borrowing standards, including no-money-down loans and relaxed financial documentation, brought many people into the real estate market who were ill-equipped for a downturn — and thought the market would never falter. The hot real estate markets fueled more speculation, and as a result those markets will see more of the fallout.

Another critical factor in the current crisis is the relatively new practice of separating the loan originators from the risk. In recent years, many independent mortgage brokers aggressively wrote loans, then shifted them to Wall Street firms that bundled the loans to be bought by investors across the country and around the world. Those selling the mortgages were thus isolated from the risks of delinquency or falling real estate prices, so standards were relaxed and aggressive marketing was used to bring buyers into the market who would have been considered unqualified at another, more rational, time.

Now that the bubble has burst, it is time to see the mortgage market return to its roots — to local banks and savings and loan companies.

Writing in Time magazine, Justin Fox notes that "the only lenders subject to regular visits from the feds are actual banks and savings institutions.They're closely regulated because taxpayers are on the hook for insuring the safety of their deposits." These lenders care about risk.

In the emerging mortgage crisis, it's clear that risk was ignored — by more than a few borrowers and many lenders. The risk was shifted far down the line to investors, who, until recently, were eager to buy up bundles of loans regardless of the risks, because the real estate market continued to boom.

Fox suggests that shifting the risk back to the banking industry works because "the banks and thrifts have a natural incentive to ferret out and manage credit risk."

The current real estate slump will have victims, some of whom deserve help, while others do not.

Still, some innocent people will be hurt. But the bursting of the real estate bubble, if the damage is reasonably contained, will be a good thing in the long run. It could bring some sensible lending reforms and will return sanity to the market — until the next speculative bubble of can't-lose investments develops.