I have an idea.

What if.....the lovely homeowner who has defaulted on their loan is contacted by the bank just prior to foreclosure and offers them a sweetheart deal. It would go something like this:

"Hello Mr. & Mrs. Homeowner, next week we are scheduled to go to auction on your property but we have a deal for you. We will put your house up for sale, you stay in the house and keep living there as you are and agree to all the up keep of the property. You agree to provide unabated access to the property to be able to show it to prospective buyers. You pay us nothing in the mean time. Once a buyer is found and the home is sold you will have 45 days from closing to vacate. We will provide you with relocation assistance and a $1500 moving allowance to help you get back on your feet."

Of course there will have to be some criteria like no investment property and the property has to be worth less than the outstanding mortgage amount. We can call it a Short REO.

Aw forget it. This will actually save banks money, help people recover faster thus getting bigger pool of buyers quicker back into the economy and it will halt the price slides and stimulate the economy. Makes too much sense to work.