Sometimes it’s a wonder if the housing market is still salvageable. It’s just not that home sales are down and prices are depressed and that the major mortgage servicers are in hot water for alleged mess in processing foreclosure paperwork, it’s also that the solutions that the government has offered seem to not be working. With everything looking as bleak as it is, analysts and real estate insiders say not to fret as there still is hope for the industry.

With talks of the banks making huge errors on foreclosure paperwork, buzz of foreclosure moratorium hits the market – but many contend this is not the smartest move as it may just pull the market further down. But even the foreclosure scandal, the market has not really been faring well – the federal government reports 4.2 million “seriously delinquent” mortgages from homeowners. Underwater mortgages also amount to 10.9 million borrowers.

As if that’s not enough to make everyone worry, the nation’s four biggest banks Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup record a $426 billion in second liens like second mortgages and home equity loans. Weiss Ratings documents that these banks say that only 4.5% of these loans are delinquent. However, mortgage finance analysts are still skeptical.

If the country is to find a way out, the fix should not even come in a form of a government bailout. It should allow borrowers to keep their homes and disgruntled mortgage investors to have a bit of compensation. The fix, most say, should also accommodate write down loans that are not extreme as to cause another financial crisis reminiscent of 2008’s.

Though there’s a wide disagreement about a specific solution, most are in agreement that all sides must cooperate. Many have noted that a standoff between banks and bond investors and borrowers only five bloggers, polemicists, and pundits a stone to throw the industry.

One solution being put forward is having banks take bigger writedowns on home equity but most investors are not yet ready to go this route. Banks act as if their home equity portfolios are performing well but a broad program of principal writedowns could cost the major banks around 40 to 60 cents on the dollar for second lien exposures. Others also say that home equity delinquency rate is nailed at a low because borrowers are allowed minimal monthly payments.

Writedowns being spread over many years is also a possible solution being offered by market insiders. Another is that banks must be forced to take the hit all at once while the government supports them with a loan that they can pay quarterly. But for the solutions to work banks must admit the real situation of their home equities – only then will creative solutions be made and the industry can move forward.

Some believe the country is years late in addressing the housing concern and this is why there are homeowners who are so indebted that reduced mortgage just is not enough. For these homeowners to get back on their feet, government or banks must provide rent subsidies or relocation money. Though this is somewhat resounding government bailout, those suggesting it say not if the fund will come from fines and penalties from faulty loan documentation – much like hitting two birds with one stone.

At this point, everybody may be in agreement that any solution is better than waiting on the economy to save the industry.