"The financial crisis has short-term and long-term dimensions, with the home foreclosure problem feeding the long-term pipeline," Felson said. "Simply, governments and banks must check and end the foreclosure problem, or bad bonds will continue to feed into the system, and the same bankruptcy, market stress, and contagion cycle will just continue."

The FDIC and U.S. Treasury Department are working on a program under which a bank / lender would be required to significantly drop the interest rate on a mortgage, reduce the principal or extend the life of the affected loan. In return, the bank / lender would get a government guarantee that the mortgage would be repaid.

"The FDIC's concept should be implemented and deployed as soon as possible," Felson said. "From what I've researched it is a fairly basic refinance application that could be easily applied universally, throughout the mortgage system, resulting in millions of retained homes. That's the tactic the FDIC and Treasury have to try."

Housing Sector / Economic Analysis: The U.S. Treasury has not been speedy in its effort to help homeowners, but there's no point in fretting over the past. The stock and bond/credit markets have enough bad news to deal with: what the FDIC / Treasury need to do now is quickly implement a universal refinance application for owner-occupied homes. Each refinance decision would be made on a case-by-case basis, of course, but the goal should be to get as many preventable foreclosures into 6-7%, fixed-rate, 30-year mortgages to stem the tide in home foreclosures -- the toxic asset that caused the financial crisis and one that threatens to perpetuate it.