How to solve the mortgage mess

What is the best solution to the "mortgage crisis" and "credit freeze"

My solution to this mess? The government should buy these mortgages for 70% of their current outstanding principle balance (the bank will resume the loan at a later time to be able to recover the remaining 30%. The details will be discussed later in a document I’m writing), rework the terms if it’s possible for the current owner to pay back the full amount. If the owner is unable to afford the re-worked terms, foreclose on them and sell the house at its 2002 valuations. The government would then force the ex-owner to pay back any uncovered debt over a period of 10-12 years. The 30% that the bank lost can either be taken as a write-off, with the ex-owner paying capital gains taxes on that, or the bank can set repayment terms with the ex-owner. This way, the responsible taxpayers are not footing the bill and those that played the game and lost will have learned a lesson. And home prices will return to normal quicker due to the new “comps” that are selling for 2002 prices.

The effect of this will be that:

• The banks will have new liquidity to start lending responsibly this time.
• The “homeowners” who really can’t afford their homes will return to renting while the renters waiting on the sidelines will start buying all the homes that have been foreclosed on because they will be at levels that they are expecting home prices to return to. This includes many homes which are now leaving neighborhoods in shambles.
• Realtors will start working again showing the homes that are available at reasonable prices.
• The home prices will stabilize much faster than by bailing people out.
• The government will get all their money back with interest.
• The government will not be rewarding the ones that were fiscally irresponsible by punishing those who were, which is what they want to do now.