I really would like to know why the solution is not partly renting en masses. If the banks and MBS service agents, or the government in their stead (after buying up the mortgages) rent out the foreclosed properties (first offer to the foreclosee and then anyone), the downward spiral could be halted before it seriously undershoots and hence prevent more damage to the financial economy/fiscal position (the latter two being the same thing these days!).
Banks and MBS agents don’t rent in practice so this is something the government can do. In most areas , the rent will cover the cost of carry for the mortgage assets (written down) that the tax payer has acquired because rental yield in the higher foreclosure areas are good (some extreme exurbs exempted perhaps as renters may be scarce).
