What would be the single best thing for the government to do right now to help the mortgage industry survive, give mortgage holders in good stead a break and help revive the economy?

We've long thought that the best answer would be to incentivize refinancing for the millions of mortgage holders who are paying their monthly payment and in no imminent danger of default. The fee income surge would be welcomed by the banks. The lower monthly payment would be welcomed by homeowners. Heck, they might just go out and spend the extra money. The New York Times reports that this approach is indeed under discussion, as part of a wider ranging discussion of pro-industry action.

The rule, as leaked, would allow people with GSE-backed mortgages to refinance quickly at what might be dramatically lower rates. This sounds good on paper, but bond holders will likely have something to say about this. We've already seen a mini-sell off in agency debt that might be related to this issue. This has been discussed before, but with rates falling to new lows in the wake of the Standard & Poor's downgrade, it has been given new urgency.

My guess is that the government will be constrained in promoting this. But there is nothing to keep banks from undertaking this on their own. Their best customers will appreciate the opportunity. Let's face it, a lot of customers have been refinancing like crazy since the financial crisis set in. Why not one more time? 

For more:
- here's the article

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