Some say on the long run everybody dies, some say on the long run the dwelling prices can’t be disconnected from the disposable income expected to be received during the term of the mortgage.
The real estate crisis in USA is a result of bubble created intentionally, even if not consciously, by the US Government to cope with the huge US trade deficit. The real estate prices disconnected from any economic realities and the financial instruments created around it where just a mustang to ride on it wildly, until it died of exhaustion as died the previous mustang, the DOT.COM industry.
The only way to restart the US economic growth, is to find a new horse to ride on. The alternative of balancing the trade deficit, seems to be politically mission impossible. It would need to reduce consumption, (could be done easily by taxation of consumption) or by increasing export oriented productivity and reduce production costs, it could be done by depreciation of US dollar, If the Chinese would agree to let it happen.
As to the solution to write down mortgages, can’t help, after all you can fool sometimes someone, but can’t fool everybody always.