This afteroon I caught an interview with George Soros at Davos, on CNBC. He had a very interesting response when asked specifically how the problem of actual mortgages ought to be dealt with. First he said the current and old model of mortgage lending is broken and must be dumped. His proposal? Require that lending instutions own or hold the mortgages they make, no selling into secondary markets. The lending institution must take the loan quality risk. Allow the lending institution to sell bonds connected to the mortgages that sell the interest rate risk, not the basic loan.
This sounds very old-fashioned, but very sensible to me, to the extent that I understand what he is proposing.
Navigating the new economic era is all about a return to sanity, and this is one step.