A Highly Leveraged Way to Ameliorate the Financial Crisis

There's a program that President Bush got Congress to pass in late summer 2007 called FHA Secure. As passed, it was horribly limited by Loan to Value restrictions (97%), when the problem is that most folks are actually upside down on adjustable loans.

(This means that their payments have adjusted to something they cannot afford, and it's very tough to refinance to something reasonable through any kind of traditional lending program when you owe more than the property is worth)

I've been calling for the expansion of FHA Secure - eliminating Loan to Value as a criterion, but retaining Debt to Income and all other qualifications. The cost, a lot cheaper than the bailout, could be paid by levy on the lenders being relieved of their loans to pay for eventual losses.

This would have the effect of blunting the flooding of the housing market with thousands (millions nationwide) of people being forced into short sale and foreclosure. By tamping down on the flood of properties (supply) limited demand would not drop the price nearly so far, blunting the deflation of the market and making it likely far more people could manage to dig out successfully, many of them upon their own efforts. It wouldn't solve the crisis completely, but it would definitely lessen the problem by at least a factor of two, perhaps as high as five - reducing the problem to something the market can handle with very minimal direct assistance to financial megacorporations who should have known better.

Cost to Benefit ratio: Much better than any contemplated bailout. And it even helps the little folks who were mislead into debt they couldn't handle by alleged professionals who failed in their fiduciary duty. The ones who aren't "too big to fail", but who don't have six figure incomes and severance packages to take the sting out of losing one job.