A new report from a coalition of faith-based and labor organizations is suggesting that the housing crisis can be resolved if banks write down the balance on all underwater mortgage to market value and the result would lead to the creation of over 1 million jobs.

In the report, "How Fixing the Housing Crisis will Create One Million Jobs," The New Bottom Line (NBL) suggests that by lowering the principal balance on all underwater mortgages banks will fix the foreclosure crisis, save families on average $543 per month, pump $71 billion into the economy each year, leading to the job creation.  In addition, the report states this approach will result in investors coming out ahead as compared to the negative financial impact of foreclosures.

The simple premise of the report is that underwater mortgage debt continues to be one of the primary forces that is dragging down economic recovery.  If the tens of billions of dollars consumed each year by this debt is reallocated, the money would be redistributed to consumer spending.  This would lead to new demand for jobs and increased tax revenue for governments.

Government use of resources to prop up banks has had little impact in driving recovery, and amounts merely to a waiting game for things to get better, according to the report.  Since the banks have received $14 trillion dollars in taxpayer bailouts and backstops, banks have an obligation to make direct efforts to spur economic recovery.  The report highlights that the bailouts never achieved their goal of spurring increased lending by banks that received the government support.

The underwater mortgage debt, estimated by NBL, is at $709 billion.  Additionally, they estimated that banks have historically high cash reserves of $1.64 trillion.  The suggested solution to write down this debt would cost the banks $71 billion annually in payments, however the report suggests that these amounts are largely interest charges rather than principal payments.

NBL states that this plan would also stabilize banks balance sheets and lead to a stronger mortgage-back securities (MBS) market.  A more secure MBS market would then attract more investment and increase the value of the securities.  This would lead to a much more positive result for investors then to have the on-going cloud of delinquent loans and the additional costs associated with processing and disposition of mortgages through foreclosure. 

The organization states it is a national campaign that calls for the restructuring of Wall Street to help American families build wealth and close the country's growing income inequality gap.