The shadow of a house key falls over a mortgage application form.
The shadow of a house key falls over a mortgage application form. - 
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Kai Ryssdal: There is a certain intellectual inconsistency to the American real estate market as we make our way through the last quarter of 2010. It may strangely be the best of times and the worst of times, all rolled into one.

We learned this morning that it's possible to borrow hundreds of thousands of dollars for 30 years and pay just 4.25 percent interest. 4.23 percent for a 30-year fixed-rate mortgage, to be exact. That's up just a hair from last week, but still close to the lowest rate in decades.

And yet, distress among homeowners who're in trouble continues. And almost everything the government has tried has come up short.

Our Washington bureau chief John Dimsdale explains why.

John Dimsdale: When the Making Home Affordable Program, or HAMP, started back in early 2009, President Obama set a goal of reducing payments on over three million mortgages. So far, less than half a million have been modified. And at a congressional oversight panel hearing yesterday, member Richard Neiman said HAMP's future looks no brighter.

Richard Neiman: The number of new homeowners entering the program each month is now near its lowest point.

And many homeowners who got their loans adjusted still can't meet the monthly payments. Those adjustments include spreading payments out over more years, reducing interest rates, in some cases lowering the principle. But making them has run into lots of snags.

NYU housing professor Lawrence White says lenders worry.

Lawrence White: 'Well, if I do special break for this guy, are all my other borrowers gonna start coming in and say 'oh, I can't repay; do a special deal for me.''

Plus, White says, most mortgages have been sold to investors who expect a return, and some are willing to sue the lender to collect. And now, shoddy paperwork makes it difficult to find the legitimate title holder. Finally, Julia Gordon at the Center for Responsible Lending says the second part of the government's loan modification program was never approved.

Julia Gordon: Originally the administration's foreclosure prevention plan included a change to the bankruptcy code that would have allowed bankruptcy judges to modify mortgages.

If Congress were to approve the threat of modifications in bankruptcy court, Gordon says, lenders would feel more pressure to seriously consider easier terms on mortgages that are otherwise headed for foreclosure.

In Washington, I'm John Dimsdale for Marketplace.