I agree. The rats have proposed a much more sweeping solution. I would prefer that the housing market left alone. We have had past housing slumps without bailouts. If you lived in Colorado, Texas, or Oklahoma in the mid 1980s, you will remember the large number of foreclosures. Housing prices were driven way down (50% or more loss of value).
This policy will drive up the cost of credit. There is now a substantial political risk for lending to marginal borrowers.
The industry has already eliminated most of the riskier subprime loans anyway - so I don't think much will change there. I'd venture to guess that 90% of the people who are affected are people who wouldn't qualify for anything today, since those loans are no longer available.