11.5 million U.S. home mortgages are in danger of foreclosure, o

According to Tilson, approximately 11.5 million U.S. home mortgages are in danger of foreclosure, or about 20% of outstanding mortgages. Foreclosures anywhere near that total "would be devastating" to the economy and society in general.

Rather than pursuing foreclosures, Tilson says banks should modify mortgages based on current market levels. With 30-year fixed-rate mortgages around 4.30%, a combination of lower rates and reduced principal balance would put around 8 million of those "troubled" mortgages back above water, he estimates, providing homeowners with both an incentive and the ability to stay current on their loans.

To help banks offset the risk of these mortgage modifications Tilson suggests the U.S. government guarantee all the loans via Fannie Mae, Freddie Mac and FHA. Before you scoff about this being another taxpayer-funded bailout and moral hazard run amok, consider the U.S. government has provided Fannie and Freddie a blank check through 2012. In other words, taxpayers are already guaranteeing the mortgage market so homeowners might as well share more directly in the largess; Columbia's Glenn Hubbard made a similar point in his recent Tech Ticker appearance.

Of course, any fix to the housing crisis is easier said than done and there will be huge legal and political obstacles to overcome. But Tilson believes foreclosure is "the worst-possible outcome" for everyone - the financial system, homeowners and their local communities.

So anything that prevents more foreclosures is a good thing and if ‘foreclosure gate' helps get the government and banks to agree on "real" mortgage modifications, it might end up being the best solution to our national housing nightmare.