There are no easy solutions to fixing the mess that is GBM's. It's expected to cost hundreds of billions of dollars. Yes, with a "B". And the process is expected to take years to complete. Without giving specific recommendations in the proposal, the White House did give an outline of some of the things it would like to see implemented. Including:
- Shrinking the size of the portfolio of mortgages held by government housing finance agencies by at least 10 percent a year.
- Creating an insurance fund for mortgages much like bank deposit insurance, supported by premiums paid by lenders.
- Winding down government subsidies of mortgages by raising the fees charged to cover the risk of default.
- Limiting the government’s role in housing finance to Federal Housing Administration backing of mortgages, turning most of the market over to the private sector.
- Phasing in a 10 percent down payment requirement for government guaranteed loans.
The FDIC-like insurance fund seems like it would have been a good idea to implement initially with the GBM's. And I don't see putting 10% down as a bad thing. Will it knock some potential purchasers out of the market? Sure. Will the loans being underwritten be more stable. Absolutely.