Federal Reserve Governor Elizabeth Duke thinks refinancing could save housing.

Federal Reserve Governor Elizabeth Duke called on Washington for aggressive action on housing, citing refinancing and property conversion as two possible remedies.

“Clearly the market is not functioning as it should,” Duke said, speaking in Washington on Thursday.

For refinancing, Duke suggested that the government modify its Home Affordable Refinance Program, which was launched in 2009 to allow borrowers with Fannie Mae or Freddie Mac loans to refinance their mortgage. Though structurally sound, the program has proven far too strict in its standards, and only 63,000 underwater homeowners have been able to refinance since the program began.

Duke said that by allowing homeowners to refinance, and take advantage of historically low interest rates, they could keep their homes and save thousands in monthly payments.

Duke also brushed off a common criticism of the proposal, which comes from bondholders who fear they would lose money in a refinancing effort.

“When I bought mortgage securities … I always knew they were subject to refinancing,” Duke said, referencing her background in private banking.

Another plan that Duke mentioned was property conversion, where foreclosed properties would be converted into rentals, rather than sold at a depressed price. Because of how low REO properties sell for, they have been negatively impacting the prices of nearby properties, and a conversion plan could reduce that effect.