A number of new ideas are in the works to prevent the numerous amounts of foreclosures on the rise.

One of those would let judges reduce primary home loans, like what is sometimes with credit card debt, etc. This idea is being supported by Senator Christoper Dodd in Connecticut and Senator Richard Durbin in Illinois. It would not cost tax payers, which is a plus, but according to the Mortgage Bankers Association, in order to put the plan into affect, rates would have to be raised on home loans by possibly 1.5%, to counteract losses incurred in the diminishing of debts owed.

John H. Vogel, an economist at Dartmouth, has another potential idea. He thinks the government should buy the mortgages of struggling borrowers and give them smaller ones according to the current real estate values. However, the new prices of the homes would be fixed at that new loan amount. This would make at least 2 million homes more affordable, but it would not allow potential profit for the owners if the market boomed. This would also cost the bank a lot of money, although some would be returned as the new, lower loans, were repaid.

The OTS, Office of Thrift Supervision, wants to create negative amortization certificates, which is where for example a bank agrees to lower a mortgage, for example a mortgage of $300,000 to $250,000, and then issue the lender a certificate for the price difference of $50,000. When the home is eventually sold, the lender gets paid off first with the NAC of $50,000 and any additional profit to the owner (if for example, the home was sold for $310,000. However, if the home is sold for less then $300,000 the bank gets all the profit and the NAC is null. This would be an asset for the bank and the borrowers but the owners would have less motivation to sell because they would know the bank has first dibs on profit and also the NAC amounts would be hard to determine.

Another proposal is that the Federal Reserve buy all bad mortgage debts from the bank, which helps the banks. This would help lower mortgage rates and bring in more buyers. However, tax payers would bear the brunt, and borrowers may refinance, making the possibility for more home loss, and lower realty prices.