FOXNews.com - Fed Aid Sets Off a Rush to Refinance - Local News | News Articles | National News | US News: "The Federal Reserve's attempt to stabilize the housing market set off a chain reaction across the U.S. on Tuesday, dropping interest rates and quickly spurring a burst of refinancing activity by borrowers eager to lower their mortgage costs."
For the moment lenders seem to be favoring loan modifications to short sale. It looks like their strategy is to put off the day of reckoning as long as possible. I suppose there is a slight chance they could spread the problem of over price housing over such long period of time, they could let inflation erase the main problem.
That problem being that in many areas there are not enough buyers who can qualify for the homes, seller wish to sell.