Alyssa Katz

Underwater on your mortgage? Thinking about asking your lender to sign off on a short sale, or even just mailing back the keys? If you've tried to request clearance for a short sale, you know that most banks have hesitated to give an OK to borrowers who want to bail out for less than their property is worth. But thanks to the Obama administration, your moment may have now arrived.

As detailed by The New York Times today, starting on April 5th the Department of the Treasury will support short sales and deeds-in-lieu-of-foreclosure as options for homeowners who owe their lenders more than the sale price of the property.

Late on your mortgage? Did you know you might be able to negotiate a 20 percent reduction in what you owe? Josh Rosner, a financial analyst specializing in mortgage-backed securities, says that lenders know that if a home goes into foreclosure, the lender will lose 60 percent or more. So what's stopping them? The banks that hold the second mortgages. Those banks routinely block such requests because debt reduction for a borrower would spell instant losses for them. And Treasury is letting them get away with it.

It's enough to make most people furious, and a recent New York summit that brought together the rock stars of power-to-the-people financial reform-everyone from TARP watchdog Elizabeth Warren, Nobel Prize-winning economist Joseph Stiglitz, and investor George Soros to Rosner, ex-New York governor Eliot Spitzer, and MSNBC's Dylan Ratigan-one message came through loud and clear: The American people are mad as hell about a financial system that puts them last, and aren't going to take it anymore.

This week home mortgage borrowers got the latest word on how much they owe compared to the actual value of their real estate – and the numbers are only getting uglier.

First American CoreLogic, a company that gathers data on millions of mortgages that have been packaged into securities for investors, reports that nearly one in four home loans nationally is now larger than the actual value of the home that backs it. In other words, one-quarter of all home loans are underwater!

In just the last three months of 2009, plummeting home prices and accumulating debts pushed 620,000 more homeowners into negative territory.

Next Tuesday, March 2, was a date I'd eagerly marked on my calendar. The House Financial Services Committee, chaired by Rep. Barney Frank (D-MA), was supposed to hold a hearing on "Housing Finance and the Path to Reform, Part 1-Government and Stakeholder Perspectives."

To translate that for the rest of you, Frank's committee was going to have a serious, public talk about the future of Fannie Mae and Freddie Mac. And it had invited two very special guests: Treasury Secretary Tim Geithner and U.S. Department of Housing and Urban Development Secretary Shaun Donovan.

So I was disappointed, but not surprised, to get an email yesterday announcing that the hearing had been "postponed to a date and time to be announced later." Yet again, the Obama administration has wiggled out of an obligation to tell the American people exactly what it envisions the home finance system of the future will actually look like.

The U.S. has a real estate problem. It appears we don't have enough homes to put a roof over everyone's heads.

Say what?

That's the warning from housing economist David Crowe, who projects that the number of homes now being built – on pace toward 591,000 homes and 87,000 rental apartments in 2010 -- isn't enough to keep up with an ever-rising American population. He says that the nation will need to build 16 million new homes over the next decade, or more than twice as many as are coming online now, to keep up with demand. Crowe hints that he's not alone in his concern: "Economists are beginning to sound the warning that today's extremely low levels of new residential production could lead to significant housing shortages."

Now, take this with a grain of salt. David Crowe is the chief economist for the National Association of Home Builders, so part of his job is to inspire fear in the hearts of Congress and government officials across the land to do what's necessary to support residential construction, including propping up the comatose Wall Street market in real estate finance.

In his latest effort to stop the foreclosure tidal wave, President Obama, flanked by Nevada Senator Harry Reid (D), on Friday announced a Plan B for five states hardest hit by the housing crisis: Nevada, Florida, Michigan, California, and Arizona. The president is directing an additional $1.5 billion in aid to the states, which they can spend as they choose.

It's small change compared to the $50 billion the feds have committed so far to the Home Affordable Modification Program, but don't be deceived. This could be the first baby step toward real help for homeowners – if the states play their cards right.

Heartened by the recent rise in home prices? Don't get too comfortable. Standard & Poor's, the credit-rating agency that tells investors what mortgage-backed securities are worth, reports that the increase was just an illusion. It predicts the nation is about to see a deluge of new foreclosures that will drive real estate values back down.

Blame the "shadow inventory" – nearly 1.8 million homes that are on the road to foreclosure but for all kinds of reasons haven't gotten there yet.

The idea kept coming up this week. Since Congress won't push mortgage lenders and servicers to reduce the principal overwhelmed borrowers owe, then why not find another way to give them financial relief: cash payments.

First a company called Loan Value Group rolled out a product it calls the "Responsible Homeowner Award," which makes incentive payments to deeply underwater borrowers who might otherwise walk away from their mortgages. (An estimated one in three borrowers now owe more than their homes are worth.) The payments are made by investors in mortgage-backed securities who stand to take serious losses as borrowers go into foreclosure. Homeowners who sign up would not be able to access the funds until the mortgages are paid off, or they've amassed enough equity to sell or refinance their homes. Loan Value Group expects that the promise of a tasty bonus at the end of the rainbow will be enough to entice some borrowers to stick it out and hope for a turnaround in home prices.

Then the idea got a plug from a big man in banking, New York State Banking Superintendent Richard Neiman (pictured), who wrote a letter to The New York Times supporting a similar concept.

What's a city supposed to do when foreclosures tally into the thousands and streets are glutted with far more empty, falling-apart houses than people willing to live in them?

For a growing number of cities, a big part of the answer is: knock 'em down.

The U.S. Department of Housing and Urban Development has awarded $2 billion in grants in the second phase of its Neighborhood Stabilization Program, in which local governments and nonprofits had to compete to prove they had the worthiest plans for foreclosure recovery. But stabilization can take many forms, as the plans make clear.

Think time travel is impossible? Then explain how we've moved the clock back to 2003.

The latest Census stats on homeownership show that just 67 percent of U.S. households own their home, down from a peak of 69 percent in 2007. That brings the share of homeowners back down to its level seven years ago.

The nation actually has a few more homeowners than it did last year – just over 75 million -- because the population overall is growing. But foreclosures have pushed millions of families out of their homes in the last two years, and with it their chance to live the American Dream.

Those numbers alone don't tell the whole story, though. Some segments of the nation are losing ground faster than others.

With home prices continuing to plummet every month, it may be hard to believe. But it's now officially government policy to keep those home values as high as possible. And Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program, doesn't like it one bit.

In his latest quarterly report to Congress, Barofsky accuses the Obama administration of recklessly reinflating the real estate bubble in an attempt to keep the housing market going and prevent the collapse of financial institutions.

Here's a neat trick: In the budget it released yesterday, the U.S. Department of Housing and Urban Development is proposing to increase spending in 2011, including a new billion-dollar fund to build affordable housing for rent. At the same time, it's cutting its budget request to Congress by 5 percent.

How does HUD make the math work? Thank the mortgage meltdown for an unexpected windfall.

Big real estate developers do it all the time - like yesterday, when the owner of New York City's Stuyvesant Town complex decided to stop paying its $3 billion mortgage. So why are you still writing a check every month on that mortgage that's much bigger than your home is actually worth?

Good question, University of Chicago economist Richard Thaler says. Thaler tells New York Times readers that it's not just alright to walk away from one's over-sized mortgage -- it may actually be a moral imperative. (An earlier Times article, by Roger Lowenstein, said much the same thing.) After all, lenders had no second thoughts about lending more than many borrowers could afford or than the homes might actually be worth. It's just not fair to expect borrowers to follow rules that the lenders don't.

But why stop there? Some commentators are now calling on borrowers to start a mass mortgage strike.

Among the usual promises to streamline government services and help the unemployed get jobs, New York City Mayor Michael Bloomberg's State of the City address earlier this week heralded something you don't usually hear in these kinds of speeches: in the mayor's words, "the most ambitious foreclosure prevention effort of any city in the nation."

A new mortgage assistance fund will help borrowers who are in trouble but whose limited financial resources disqualify them from the federal Home Affordable Modification Program. Cities from Boston to Jacksonville, Florida, provide financial assistance to help troubled homeowners patch holes in their finances and avoid foreclosure. But New York City is introducing something new: a grant that lasts for as long as a borrower continues to own the home, and must be repaid only when the property is sold.

Wait, aren't loan modifications supposed to provide financial relief? Yes – if you consider a teaser mortgage rate to be a bargain.

A new report finds that seven in every ten borrowers who have received a change in their mortgage in order to forestall foreclosure actually now owe more in principal than they did when they started.

Yes, more.

Those borrowers gain in the short term, by lowering their monthly bills. But in the long run they're in more debt than when they started.