Some US cities are starting to take drastic action to correct their housing markets. Whole swathes of Detroit, where houses are now selling for less than the cost of a tank of petrol, are to be demolished in an attempt to balance supply and demand. Houses in Florida are deliberately being left to the ravages of nature.

In this country, we are some way off bulldozing the commuter belt, but many homeowners are teetering on the brink, with nearly 4% of mortgages in delinquency. The future is looking bleak for thousands of people facing into long periods of negative equity and a desperate situation if their financial circumstances change for the worse. There are ways, however, that the lenders could ease their burden. Here are five ideas.

1. The 125% mortgage

Sharp intakes of breaths greeted the introduction of a 125% mortgage by British building society Nationwide last month. After all, it sounds remarkably like the kind of lending that got us into this mess in the first place. The Nationwide mortgage is, however, a much different beast to the irresponsible loans doled out to overstretched first-time buyers in the boom.

Borrowers must have an existing mortgage with Nationwide. The bank will allow them to borrow 95% of the value of their new house at high fixed rates (6.73% for three years or 7.48% for five years). The customer can add the negative equity from their old mortgage – up to another 25% of the value of the new property – at even higher fixed rates. It's an expensive option but opens the negative equity trap for people who must move. The product is a prudent and socially responsible response to negative equity, according to Kevin McNerney, director of the Citadel network's Mortgage Finance Company.

"At a time when over-cautious and restrictive lending practices are holding the housing market back, Nationwide's flexible approach is to be welcomed. When customers are in negative equity, they already have a mortgage of greater than 100%, but now Nationwide allows them to move house and transfer the debt to the new property. Granted, it does not solve their long-term negative equity problem, but it does allow them to be in negative equity in a property that better suits their needs and is more desirable to them, which would help somewhat to ease the burden," he says.

If 125% is too high, a 100% mortgage granted under strict conditions would also work. However, with just two or three banks now actively pursuing new business in Ireland and most refusing to lend more than 80% of a property's value to non-first time buyers, it seems unlikely that consumers will be applying for a similar mortgage any time soon.

2. Let the subprime lenders take the hit

Repossession orders continue to be issued in the High Court on a weekly basis, largely for mortgages issued by subprime lenders in the latter years of the boom. These mortgages were often issued to already heavily indebted applicants, and were based on home equity rather than a thorough assessment of their ability to repay.

Paul Joyce, senior policy researcher with the Free Legal Advice Centre, believes that making the subprime lenders take some of the pain should be seriously considered.

"It is one thing if the loan was reasonable in the circumstances and the lender carried out the appropriate credit and income checks and satisfied itself on the basis of the information it had that there was a capacity to repay. However, a lot of these loans were 100%-plus in terms of the value of the property and based on very little checking of income. It seems to us unfair that the borrower, who, let's face it, has not acted with great dignity either, should be wholly responsible… Certainly, if there is evidence that the capacity to repay the loan was not there in the first place, we would see that some responsibility would lie with the credit provider," he says.

Essentially, the lender would accept that once the house has been repossessed, the borrower bears no further liability even if a sale fails to cover the outstanding mortgage. As it stands, the lender is free to pursue the debtor for the balance even after taking back the secured asset.

3. Short-selling

Subprime lenders are responsible for a relatively small share of the Irish mortgage market. The prime lenders – banks and building societies – have so far avoided mass repossessions, but with delinquent mortgages on the rise, they too are likely to take a tougher stance with troubled borrowers. One option may be short-selling, where the lender consents to the sale of the home at whatever the prevailing market rate is and accepts whatever loss is incurred. The mortgage-holder emerges with a greatly reduced or no outstanding mortgage debt and the lender recoups at least some of the loan.

Short-selling is becoming increasingly popular in the US but lenders are understandably reluctant to consent, as it means accepting a modest loss. Therein lies a major problem in Ireland: property prices have fallen so sharply here, with estimates that the market could fall 40% from peak to trough, that the banks would be seriously out of pocket if they were to accept the entire loss. A portion of it, however, may be more palatable.

If the banks are willing to take a haircut on developers' loans, why not extend the same courtesy to their residential mortgage customers? And houses on sale at realistic prices will also help stimulate the market.

4. Waive fixed-rate breakout fees

The lenders have remained firm on their refusal to waive breakout fees for customers on high fixed-rate mortgages despite political pressure and, in fairness, the Financial Regulator has cleared them of any profiteering in this regard. Lenders are never going to let borrowers break out of fixed rates fee-free just so they can avail of a lower variable rate. However, they should consider waiving the breakout fees for customers willing to tackle negative equity, says James Maguire, associate director of Financial Engineering.

"Both the bank and the home owner should be looking at ways to reduce the mortgage as quickly as possible over the next few years to allow people to move house again. To do this, maybe they should be allowing people to break out of high fixed rates and go to a lower fixed rate but keep the monthly repayment high to reduce the capital quicker and close the gap on negative equity," he says.

5. Sharing equity

Some economists have been suggesting that the solution to the housing crisis lies in the creation of shared equity agreements, where a lender takes a stake in the home in exchange for a reduced interest rate or a shorter mortgage term. So you and the lender essentially become co-owners of the property. When the market recovers, both will benefit from the increased value of the equity. As part of the deal, the bank would agree to remortgage when the time is right, allowing the lender to take out its equity and the mortgage-holder to revert to a standard mortgage.