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If your loan is owned by Fannie or Freddie, you may qualify for the Home Affordable Refinance Program, or HARP. Some 2.5 million to 3 million homeowners may be eligible to use HARP, according to government estimates -- provided, among other things, that they have not been late on their payments more than once in the last 12 months.

Instead of the 80 percent loan-to-home-value required in most initial mortgages today (the remaining 20 percent comes from your down payment), HARP loans offer up to 125 percent, to cover the home's shrunken value. That means a home appraised at $500,000 could warrant a loan of up to $625,000, if the owner's income was sufficient to repay it, instead of the maximum $400,000 in most conventional mortgages.

Federal Housing Administration loans also have refinancing options. One of them, the F.H.A. Short Refinance option, requires the lender to write down at least 10 percent of the remaining balance of the loan and the homeowner to be current on payments, among other requirements. Still other programs are available for people who have lost their jobs.

If your loan is held by a bank or has been bundled up and sold to an investment group, your options may be more limited. "It is case by case," Mr. Hackett said. You may need to call around to locate other lenders willing to refinance underwater loans.

Lenders like Atlantic Home Loans have started offering loans with lender-paid mortgage insurance, and will refinance at 95 percent of the value, Mrs. Sweet-Kostoplis said. She added that one of her clients reduced her mortgage payment by $850 a month when the rate came down to 4.5 percent from 6.7 percent.