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Many, like Andrea and James, have moved back home. Almost 6m Americans between 25 and 34 lived with their parents in 2011, up from 4.7m when the recession began in 2007, the Census Bureau said.

Brad Doremus, senior analyst at Reis, the commercial real estate research group, said first-time buyers are particularly hurt by tighter mortgage requirements that are even harder to meet with growing student debt burdens.

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Roshell Schenck, 28, from Erie, Pennsylvania, has a PhD in pharmacy and earns $125,000 a year -- but yet she is unable to own a home.

"Between undergraduate and doctorate schooling and interest, I now have approximately $120,000 in loans," she said. "Although I make a very good salary, there is no government help for housing programmes because of the amount of money I make and there is no one willing to give me a loan because of the amount of student loan debt I have."

The model could be a new California effort that will pay for writedowns using federal dollars set aside for regions that have seen the worst housing-market declines, the person said. Because the government will bear the full costs of the California program, mortgages backed by the two government- sponsored enterprises will be eligible for the first time.

Whether this hybrid system of market Leninism -- with banks run by Party bosses -- conforms to Western monetary theory is a hotly contested point. The issue will be settled one way or the other soon

That said, I do not think home prices are going much of anywhere "in general" because there is still years of shadow inventory and years of foreclosures to work through.

While commercial and industrial lending has been rising sharply, domestic banks are picking up European bank customers and auto lending is strong, mortgage lending remains sluggish because of tight lending standards and terms.  A return to pre-crisis lending standards wouldn't be appropriate but the current standards may be hampering lending to many creditworthy borrowers.   This may also be impacting some small business lending where borrowers would typically refinance their homes for funding or use the house for collateral for a business loan.

Since the middle of March, the official expanded HARP refinance has been available to existing borrowers who are underwater with their mortgages. In other words, these borrowers owe more than the value of the property due to real estate market conditions. Unable to refinance to any type of mortgage, HARP was updated to include an unlimited loan to value, except for adjustable rate mortgages, so that all borrowers who have mortgages funded prior to June 1, 2009 with Fannie Mae or Freddie Mac could refinance to a lower mortgage rate. In many cases, these refinance applications for HARP do not require an appraisal to determine the value of the home. Now that the program has been underway for almost two months, borrowers have been finding that many lenders, especially the major banks, are unable to give them immediate assistance. In some cases, it can take 30, 60 or even 90 days to even receive a call from the lender to discuss the possibilities of the borrower refinancing. During the days of the housing boom when masses of borrowers were seeking purchase and refinance mortgages, this problem did not exist since banks were ready, willing and staffed to close on mortgages right away. According to Accenture Credit Services and reported in the Wall Street Journal, the largest mortgage lenders are often taking more than 70 days to complete a refinance. This is completely unacceptable for borrowers who are anxious to apply for and complete a HARP refinance now, not in the future when mortgage rates may be higher. Borrowers should be aware that they do not need to use the big banks for a HARP mortgage, nor do they need to use their original lender or current servicer.

Many borrowers are finding that the quickest and easiest way to receive HARP information is by inquiring online at their convenience. With a minimal amount of information submitted, borrowers will receive a call from the lender or broker within minutes of placing their inquiry. Often, lenders will contact them on the same day with the results of their application, such as approval and details. Since lenders and protocol are different, it may take 5 to 10 days to receive an approval which is still much shorter than what the big banks are offering. Many small lenders and brokers have maintained or increased their staff and are able to easily handle the volume of applicants coming their way. The online HARP process is quick, efficient and has been able to help numerous borrowers refinance quickly.

Conforming mortgage rates are low now, but no one knows where they are heading or will be in 60 to 90 days. Even after receiving a HARP approval, if a borrower waiting for a closing needs to lock a mortgage rate for a long period of time, the cost is higher. HARP is supposed to be a streamlined process that is completed quickly. It is becoming more evident that, as some borrowers welcome faster HARP loan responses, the word will spread sending more consumers to the convenience and efficiency of an online HARP mortgage application where customer service is an important part of the overall experience.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

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In addition there are four legislative proposals supported by the administration which could ensure that every responsible borrower has the opportunity to refinance and rebuild equity. The first would guarantee non-government backed borrowers' access to refinancing as long as they are current on their mortgage, meet a minimum credit score, have a loan within conforming limits and are currently employed. This program includes features to minimize program costs and lenders who wanted to refinance deeply underwater loans would have to write down principal balances to reduce stress on the borrower as well as taxpayer risk. While this program would be run through the FHA it would be financed outside of FHA mortgage insurance fund.

The second proposal, sponsored by Senator Menendez, would allow HUD to clear the remaining barriers to refinancing GSE-insured loans. This bill would extend streamlined refinancing for all GSE borrowers irrespective of their loan to value ratio and creates competition between lenders and removes potential hurdles like unnecessary appraisals.

The remaining two legislative proposals are designed to build equity. The first proposes that the average closing costs, about $3,000, be paid by the GSEs if the borrowers agree to refinance into a loan with a term of 20 years or less. This would provide a path for borrowers to get their heads above water faster. The second is the Project Rebuild Act which would further stabilize places where prices have dropped the most and would create 200,000 jobs.

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Richard Shelby (R-AL) expressed his concern about the solvency of FHA which the latest actuarial report says has a capital ratio of only 0.24 percent which he called "pretty low" and asked Donovan how he planned to increase the number, when it would be above the statutorily required 2 percent and whether even that was adequate to prevent taxpayers from bailing our FHA in the future. "If a private mortgage insurer held only 2 percent capital," he asked, "do you believe it would be adequately capitalized?