“Change the rules of foreclosure. Instead of banks beginning the foreclosure process, owners should have the option to rent their house, at a fair-market rate determined by an independent appraiser. And they can stay indefinitely. The bank will own the house. This isn’t a windfall for the homeowner. But they’re not on the street. Whoever buys the house would have to deal with the renters, letting them stay.”

I see this as accelerating the price declines and double punishing the banks. One, they are forced to write off the loan, and two, they are forced to try to sell the REO with unhappy renters – worse, folks who probably feel some sense of entitlement to the house – attached. Furthermore, these houses would only sell to investors, not for owner occupied. Hard to quantify but I bet the discount would be substantial.

Man this whole thing is gonna get ugly. Thank god I am a renter; my only fear is that our government hyperinflates itself out of this situation … on top of how sour the public sentiment will become.