Charles Calomiris (2008):
How To Prevent Foreclosures: Forbes: [T]he successful Mexican "Punto Final" plan of 1999, which resulted in substantial debt write-downs very quickly and the resolution of much financial gridlock in that country. The government would share losses borne by lenders from mortgage principal write-downs on a proportional basis. For example, taxpayers could absorb 20% of the write-down cost borne by lenders on any mortgage so long as it is agreed through a voluntary renegotiation between lenders and borrowers, and so long as doing so creates a sufficient write-down for borrowers to be able qualify for refinancing under the FHA facility….
The group of borrowers whom it would help are those whose mortgages need a little more of a write-down than their lenders would be willing to do without a subsidy. For this "marginal" group, foreclosure creates only a small private benefit to lenders compared with the alternative of agreeing to a viable mortgage write-down….
This plan could avoid a lot of foreclosures at lower taxpayer cost… without rewarding the worst kind of behavior by lenders and borrowers. Relatively careful lenders and borrowers who are close to reaching renegotiation on their own would be "pushed over the goal line" of avoiding foreclosure…. I would guess that a 20% loss sharing offer would make a big difference at modest cost…