In her remarks, Senator Clinton emphasized the urgent need to act. "The subprime problems are now creating massive issues on Wall Street. It is a serious problem affecting our housing market and millions of hard working families buying a home, many of them for the first time. We need to expand the role of the Federal Housing Administration to issue more mortgages at better rates to these homeowners. And we need to give consumers more counseling and information, prevent families from being trapped in high interest loans with pre-payment penalties, and in some cases allow more breathing room from foreclosure. This market is clearly broken, and if we don't fix it, it could threaten our entire housing market," said Senator Clinton.
This sounds about right. Essentially you need to make it possible for people to refinance, both by getting rid of prepayment penalties and strongly "encouraging" lenders who gave out a bunch of mortages they shouldn't have to renegotiate the terms in order to make repayment more realistic.