At least one U.S. Senator seems to think so. According to U.S. Senator John Ensign (R-NV) appearing this morning on CNBC’s Squawk Box, Senate Republicans are considering adding to the President’s stimulus plan a provision that would enable current homeowners to refinance their current loans into new 30-year fixed rate mortgages with interest rates equal to 4%.

Senator Ensign did not elaborate on how such a plan would solve the current housing crisis, although he did correctly point out that such a provision could have significant stimulative impacts on the economy. On that point, the Senator’s plan seems valid. He noted that the average homeowner would see their fixed housing payments reduced nearly $400 per month, which he correctly described as the equivalent of an immediately available tax cut. And assuming his savings calculations are correct, and given the permanent nature of those savings, consumers – even in this economy - would likely direct some percentage of those savings to increased spending.

No doubt increased consumer spending – especially spending that results from cash on hand and not credit – could have positive economic impacts. On the other hand, it seems naïve to suggest that the current housing crisis will be resolved simply through a tax cut – even one whose impact will be as immediate as the one that would result from this proposed plan.

The answer to the question involving the full impacts of Senator Ensign’s refinance proposal on the current housing crisis lies in the details, which have yet to be articulated. However, to be sure, solving this problem requires unconventional thinking and solutions as the standard approaches have thus far failed to have the desired impacts. This will require, among other things, that an effective refinance plan will require that we cast aside (temporarily – for this program only) many of the standard principles of mortgage lending. Here are some proposals for the Senator’s consideration:

1. Remember that homeowners current on their mortgages aren’t the real problem. For the most part, the current housing crisis is not a result of those homeowners who remain current on their mortgage payments – even where those homeowners’ mortgage interest rates are high relative to current rates. It is largely the result of borrowers who have defaulted on their mortgage obligations and whose properties have been foreclosed on resulting in a situation where property values have spiraled down.

2. An effective refinance plan would need to accommodate reduced home values. As reported only today, data from an S&P/Case-Shiller report showed that U.S. home prices fell 18.2 percent from November a year earlier. In many cases, these precipitous declines in value have left homeowners owning more on their homes than they are currently worth. Under traditional guidelines such homeowners would not be eligible to refinance or would be required to make significant cash payments at closing in order to qualify. Therefore, this proposal should disregard the current value entirely and should refinance the current principle at 100% regardless of the homeowners’ loan-to-value ratios.

3. The Plan should disregard borrowers’ income and employment status. For maximum impact the program should not impose any requirements on borrowers regarding employment or income. And though this may seem counterintuitive, the principle is quite simple really, For borrowers who are current on their mortgage over the past 12 months and whose mortgage payments would be significantly reduced by a refinance under this plan, those borrowers should be permitted to qualify regardless of their income or employment. That’s right – regardless of their income or even if they are unemployed. If they have been making their payments and their new payment will be less, then who cares about such things … their chances of success are improved by having a lower payment. Such treatment is not without precedent and is in fact part of FHA’s current streamline refinance program.

4. Leverage Ginnie Mae as a guarantor of the securities associated with these loans. Many of the proposals outlined above will undoubtedly be met with skepticism by the mainstream banking community who will argue that such loans would not be eligible for traditional securitization, which would make it difficult for them to make such loans. This is where Ginnie Mae could come in and serve as the guarantor of securities issued in connection with this unique class of mortgage assets.

No doubt other requirements would be needed to make such a program a success. But what is also certain is that creativity will need to be the cornerstone of such a plan if it is to have the desired impact of materially addressing the current housing crisis.