1) Immediate moratorium on foreclosures.
2) Instead of foreclosure, defaulted homes should be purchased from the bank by the Federal government at a fair market price (appraised value).
3) Homeowners in default should be given an option of either vacating their house, which they would do anyway after the foreclosure, or staying on as a paying tenants to the government. The rent should be determined by the market value for the area.
The results of this program would be:
1) Once the flood of foreclosures stops, market value will immediately go up. Honest homeowners benefit, taxpayers get their money back with profit.
2) Owners in default are not becoming homeless, and yet are not given a free ride in a home they stopped paying for.
3) Economy will improve.
It may seem to simple, but it is a very good solution. I do not think there is enough gut in Washington to do something like that, though.