All it would take would be a little legislation.
How about this: Let's have a federal bill that states that any bank that took a bailout loan and hasn't paid it back yet isn't permitted to foreclose on anybody's primary residence. In addition, bonuses for senior officers at lending institutions will be reduced by a factor tied to its foreclosure record for that year. High rate of foreclosures would mean low bonuses. At the same time, institutions that refrain from foreclosing on people's homes would be granted tax abatements on their profits indexed to the amount they are putting at risk by allowing homeowners to renegotiate their loans and remain in their residences.
Of course, passage of such a law would also involve responsibilities on the part of defaulting borrowers. For instance, no resident would be permitted to simply walk away from a house simply because its market value had fallen 10% below the size of its mortgage. That seems to be happening all over the place right now. That's not good. Lenders have rights, too.
In short, a spirit of enlightened responsibility and mutually assured destruction must be re-established on both sides of the equation -- lender and borrower alike. They say you can't legislate these things, but they're usually wrong. Just about everything can be. They say that short-term, mechanistic fixes aren't organic to the system and can't be sustained. Really? Tell that to the guy I just gave five bucks on the way to work. He's having breakfast on that right now. Not to mention all the banks that just reported record profits, who got their own handouts not long ago.
The situation as it exists is dire. People are out on the street. Banks own a bunch of worthless real estate that's flooding the market, just sitting there. Stupid banks made stupid deals with hopeful people. Together, they made their bed. Now they should be forced to lie in it, side by side, until this long night is over.
Any lawyers out there are invited to improve on the basic structure of this concept. And any politician who wishes should feel free to appropriate it and take credit for it. Isn't that what you people do?