The Blinders Housing Fix
Let me first say that the housing market is not broken, so nothing really needs fixing. House prices are falling which basically shows that the market is working. There is a boatload of supply out there, and demand is constrained by the economy and tighter credit standards. If house prices were going up right now you could claim that the market was broken. So house prices need to drop to where supply and demand can balance out. The only thing that can really be done is to try to prevent the values from overshooting to the downside, which could hurt the economy even further. So a fix to the housing problem will not prevent housing prices from falling, but may soften the landing a bit.
So this is what I propose, since we love to throw billions around like it is nothing. Have the U.S. loan me 10 Billion at a super low interest rate (say 4%). It does not have to be me, it could be anyone (just private sector). What I will do with the money, is go out and buy the most distressed properties in the areas with the highest level of foreclosures. I will hire a ton of people to rehabilitate them, and then I will rent them out for 5 years minimum until the housing market improves. At that point I can choose to continue to rent them out, or to sell.
So how does this help?
It takes the distressed low end completely off of the market. This will drive down inventory a ton and stabilize prices. Figuring you could go in and buy at 10% below current market prices with a low fixed interest rate, you would be profitable at pretty low rents compared to the current mortgage payments. You will be hiring people to find, buy, rehabilitate, and manage the rentals which will stimulate the economy. The government just has to provide the loans, and will earn interest. Unless the housing market is down for 10 more years, the loans should all get paid back. You could even take distressed mortgages off the market, by buying the property from the bank at 10% below market, and renting it back out to the original borrower at a much lower monthly amount.
So with the above plan, we can help stabilize housing prices, and create a bunch of jobs without costing a dime to the government if all goes well. Based on that, it will obviously never happen.