The declining value of homes has 10.3 percent of U.S. homeowners in a bind, the Times said Friday. Caught between falling prices and the desire to move, some have had to take checks to the closing to pay off mortgages when they sell. Some chose default and face foreclosure.

"People can't believe this is happening to them," Robert Moulton, president of the Americana Mortgage Group, told the Times.

Lawmakers in Washington are struggling to find a solution. A bailout of swamped homeowners is an idea that makes politicians nervous but policy makers are considering ways to refinance billions worth of troubled mortgages, the paper said.

The highly exposed Bank of America is pushing for the creation of a new federal agency to buy delinquent mortgages. The idea has not found much support, although the crisis could lead to "an unprecedented number" of foreclosures, the bank warned.