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In a really good mystery, the author can spin a set of circumstances to look like one thing has happened, and then unravel them to reveal a completely different - but equally plausible - sequence of events. I find myself asking if that’s what’s going on in the current mortgage-delinquency market.

Simply put, there are two disturbing trends - the number of mortgages that are entering the phase known as delinquency is rising, and the amount of those mortgages is rising. That is, a greater number of owners in more-expensive homes are falling behind on their payments.

Just for context, let me walk you through the process. A mortgage becomes delinquent when the owners are 30 days late with a payment. At this point, the lender traditionally sends a notice of delinquency. From this point forward, which is required under law if it wants to proceed with the foreclosure process, the lender files a notice of default. This notice must be served to the owners or posted on the property, and informs the owners that they have 90 days to make up all past-due payments and late fees to stop the process.

After this 90 day period, they have just 30 days to pay the entire loan balance in full, plus charges, penalties, and anything else the lender can legally throw in. If you’re keeping track, we’re up to five months here.

At the height of the housing crisis, lenders were so bogged down in defaults and foreclosures that it could be months before some owners received a notice of default. They could live in the house for a year or more without making payments.

Back to the explanation of what’s happening. One possibility is that wealthier people with more-expensive houses had more resources to fall back on. Those who were hit first may have been reaching to get into the housing market, and over-extended themselves. Wealthier people who were laid off from high-paying jobs still had home-equity lines, credit cards, stocks (though not as valuable as they once had been) to see them through. But the economy isn’t improving fast enough. These people may have been expecting that new job to come through, but it hasn’t, and now they’ve burned through those resources. They are now facing the same kind of stomach-churning fear that poorer people have been feeling. Hence, an increase in delinquencies for high-end properties.

Or is there a different explanation? It’s also possible that the lenders finally worked through their backlog and started the potentially four to five-month-long process earlier? Do they finally have the resources to start sending notices of delinquency and default earlier? It’s a mystery.

Either way, I find myself torn. This rising delinquency rate is bad for homeowners, but good for DBNR. When we started this business a year ago, most of what was on the market was substandard. We originally bought 33 houses for an average of $6,200 each. Now, we’re beginning to see more high-end property worth significantly more. That gives us a bigger pool of potential buyers, people looking for bargains in nicer neighborhoods. That’s capitalism - a system designed to help those with capital, as well as healthy chunks of luck and patience. But as a devotee of idealism as well as capitalism, I still feel for those caught up in these difficult times.

When the housing crisis first hit, there was a chain reaction not unlike an actual train wreck. As foreclosures mounted, clogging up the tracks of lenders, homeowners in search of loan modifications started rolling in, hoping to avoid the debris up ahead but still piling up behind it. The homeowners’ requests were in many ways legitimate - they wanted to reduce the terms of their mortgage so that they would be less likely to become part of the overall wreckage.

I don’t want to express too much sympathy for banks, but they were completely unprepared for this. The same departments that traditionally handled foreclosures also handled loan mitigation, as loan modification is called in the industry. Load modification requires similar documents that an original loan does, such as income statements and credit statements, but also hardship letters. Homeowners would send these documents in, and they would disappear into a black hole. Three months later, they’d get a request that all the documents be resubmitted.

A catch-22 popped up in that, if homeowners lost their jobs in the meantime, they were no longer eligible for modification. Think about it - the people who needed it most were disqualified.

The situation got worse. As usually happens in such a crisis, third-party intermediaries step in and offer to guide dazed and confused homeowners through the process - for a fee. Now, some of these companies were legitimate. But as it happened, they were no more successful at navigating the rubble of the lenders’ loss mitigation departments than the homeowners were. Frequently, they just gave up - after they collected their fees, of course.

The situation has improved somewhat now, I’m happy to note. California has instituted some rather stringent guidelines regarding these loan modification agencies. The agency must be licensed by the California Department of Real Estate. It must comply with an 11-point checklist of items that must be taken care of before the agency is paid. Even better, the federal government is beginning to exert pressure on mortgage lenders regarding modification under the guise of consumer protection issues. To motivate the lenders, the federal government may allow the lenders to recover some of any losses attributable to the load modification. The government is also postponing for a year or two taxes that homeowners may owe as a result of obtaining debt relief.

We’ve recently come across a company called I’m Not Leaving, which has developed software that calculates figures showing bank officers how much they will benefit from load modification based on the Obama administrations’ tax credits. By doing a lot of the lenders’ own homework, it gets the process moving more quickly. According to I’m Not Leaving, it can generate a 97% approvable situation inside of 48 hours. You know what your costs are going to be before you sign a contract, and you don’t pay until the load modification goes through.

That’s what I call light at the end of the tunnel.

It’s never a good idea for someone in business to talk politics. But as I think about what’s going wrong with our mortgage system, it seems hard to avoid. I don’t mean to imply that banks and other financial services firms don’t deserve some of the blame for the housing crash. There’s really enough blame to go around. The federal government may not have been involved at the beginning, but it’s involved now.

Take Freddie Mac and Fannie Mae. According to Investopedia, they are government-sponsored enterprises. GSEs are defined as privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. But in September of 2008, the federal government took over Freddie Mac and Fannie Mae, which together accounted for 50% of the mortgages in existence.

The other 50% of mortgages are done by financial institutions who create mortgage-backed security pools. These institutions fund the mortgages on credit lines, and then pool them together on the secondary mortgage market, where pension funds and insurance companies buy them. These are some of the mortgage-backed securities that went south early on, trigging the downturn. The federal government is now trying to create new rules to govern these securities, so they will basically have their fingerprints all over most of the mortgages written in the U.S.

What concerns me is that when government gets involved, the engines of commerce tend to slow down. If the U.S. economy is going to generate a recovery, housing is going to be a key part of it. When people buy homes, it triggers a multiplier effect. They remodel. They paint. They buy new furniture. They throw housewarming parties.

Approximately 90% of the population is still working, but the housing market is still in the doldrums. We could already be in a spiral that will decrease the value of housing. In the rest of the world, the mortgage business is already quite different than in the U.S. It has higher interest rates, shorter term mortgages, bigger down payments … and less expensive housing.

Americans believe that owning a home is one of their sacred rights. The public may have to face that fact that that may be changing. If there is a transition going on in which the percentage of homeowners in the U.S. decreases, it will increase the number of renters and increase the number of investment properties. But those properties may not be as profitable as they have been, so that will make them less desirable.

I don’t have the solution to this problem but I do believe the government is going to have to start extricating itself from the mortgage business - it’s simply not its core competency. And the private sector is going to have to figure out a way to step in and take over.

Last week we pontificated about the economy, and the mixed messages it’s sending. The topic is still on our minds this week, because there’s no end of conflicting signals.

Item: San Francisco Chronicle business columnist Kathleen Pender noted on July 1^st that investors were turning to both gold and bonds, a confluence she’d never seen before.

Item: Interest rates are at historic lows, but according to my colleagues in that segment, there has not been a corresponding increase in mortgage inquiries. For my entire career in mortgage lending, when interest rates went down, the phones would ring like crazy.

Item: The stock market fell below 10,000 again, amid worries that the recession is going to be shaped like a W rather than a V. Unemployment remains high, so consumers are hanging onto their money.

I’m no more prescient than other investors. I see conflicting issues everywhere as well. On the one hand, I see the U.S. moving from a manufacturing economy to one based on technology. The latter not only needs fewer workers, but it can just as easily be replicated overseas with cheaper labor. Even if you factor in our superior intellectual property laws and transaction protections, that kind of paradigm shift always causes problems.

But on the other hand, I’ve also been talking to colleagues who are working with private hedge funds who need to invest somewhere in the neighborhood of $41 billion in order to fulfill their business plans. They want to get in, get out, and count their profits. It’s hard to do that these days (although my sense is that you could buy most of downtown San Francisco for $41 billion right about now).

That may be our current economic dilemma in a nutshell: People with money won’t do anything. People without money can’t do anything. We don’t have answers and we don’t know where to look for them.

I still believe the answer has to start with the housing market. I believe that low interest rates are going to do their part to entice buyers back in, and that may help trigger perhaps just the small avalanche necessary to get us rolling again. In the meantime, something I’m now considering is do we have a business un-friendly administration in power?

Economists like to use the term elasticity to refer to price sensitivity, but it’s equally appropriate now because the economy seems to be expanding and contracting like a rubber band held between a nervous child’s fingers.

Item: On June 16^th, the U.S. Department of Housing and Urban Development announced that privately-owned housing starts in May were at a seasonally adjusted annual rate of 593,000, below April but above May of 2009.

Item: On June 23^rd, the U.S. Department of Housing and Urban Development announced that sales of new single-family houses in May 2010 were at a seasonally adjusted annual rate of 300,000, below April and below May 2009.

Item: On June 16^th, BusinessWeek said that economists polled by Thomson Reuters expected the Conference Board’s index of leading economic indicators would fall 0.5 percent in May; it had slipped 0.1 percent in April, the first decline since March 2009.

Item: The following day, the Conference Board announced that its index of leading economic indicators had actually risen 0.4% in May, following no growth in April.

Item: On Monday of this week, CNBC reported that that day’s stock market drop came from concerns about consumer spending, which supplies some 70% of the country’s GDP.

Interest rates are at historic lows. And the latest jobs report isn’t due until Friday. No wonder everyone’s confused about the economy.

This makes me wonder if all this confusion will pass, or are we heading into a time when uncertainty is normal?

I of course look at the economy through the lens of housing. Mortgage underwriting guidelines have undergone tremendous changes thanks to regulatory intervention. Lenders are interpreting the guidelines to protect themselves from violating the new rules. But at the same time, they’re trying to find a way in those guidelines that lets them generate profitability. The government is trying to protect consumers, and the lenders are trying to protect themselves from a recurrence of what we’ve all been through.

The problem is that the economy and the housing market are inextricably linked. When I was in real estate financing, we used to say that the sale of a piece of property pays the salary of some 10,000 people, once the transaction closes. It’s no wonder that consumer spending is dropping - what’s the most logical time to buy new furniture, appliances, and electronics but when you move into a new house?

If this isn’t the “new normal,” then what will trigger a shift back to the familiar? I believe it will be the result of American ingenuity and innovation. It’ll come from the private sector and investors who have no other place to put their money. When the adjustable rate mortgage was invented in the late 1970s, it was in response to astronomically high interest rates. It was a godsend, and nobody questioned the impact. It was an opportunity to sell something.

As we get accustomed to these circumstances, and as distressed properties dissipate and get assimilated back in the mainstream, we will begin to see changes in the way people finance houses. The changes will be small at first, but more and more people will begin to get financing, and they’ll do it in creative ways that don’t look like anything we have now. I’m voting that the confusion will pass.

A few weeks ago, I wrote about a man I called NavyDaddy, a name I took from his e-mail address. He was a naval veteran in his 50s whose wife was expecting twins. Though they were living in Michigan, they were very interested in a property DBNR had in Gary, Indiana, where the wife had family. I wrote that I would continue to NavyDaddy’s story as it progressed.

Frequently in this venture, my initial interactions with a prospect are full of enthusiasm and potential. People who have been frozen out of the housing market for years, realizing an opportunity to finally get equity in a property (even a currently distressed one), are often exuberant in their fantasies. But then the realities of tax forms and income verification and such kick in, and the exuberance fade.

Not so with NavyDaddy. If anything, his enthusiasm grew, even as he struggled through mowing the overgrown lawn … and painting the bedrooms … and fixing the electrical receptacles because the junction boxes were missing. This is a 970-square-foot, 3BR, 1BA house. No garage. A freeway runs along the back fence (in the real estate business, we promote something like this as “no backyard neighbors”). But he loves it. He sent me before-and-after pictures. He sent me pictures of himself doing the work. His delight in creating a home for his family never flagged. A friend of theirs, who also survives on Social Security payments, is going to join them in Gary and help them take care of the twins.

In fact, NavyDaddy’s so excited that he’s getting ambitious. The houses on either side of this property are vacant. One of them has a garage; he’s begun to figure out how he can eventually buy that house too.

Many of us, especially here in Silicon Valley, would look on a 970-square-foot house as cramped and too small to bring up a family. For NavyDaddy and his family, it’s their dream come true.

As many of you know, one of the tenets on which I founded DBNR was to help people who may never have had homes become home owners. I admit it: I have an altruistic streak a mile wide.

But I’m not a philanthropist (not this year, anyway). I’m committed to taking care of my family too. Only a business that makes a profit can survive long enough to help those less fortunate. The two go hand in hand.

That’s why I’m always tickled when the two literally go hand in hand, as they have in what I call our “Chicago Project.” In Chicago, we own a unit in a 20-unit condominium brick building. A second unit is being foreclosed upon by a bank. The other 18 units are owned by an investor with whom I’ve been in contact. I’m not exactly sure what his story is, but I believe he was in the middle of arranging a deal to secure the assets of the entire building when his financing started getting wobbly.

I always say that you never know where your fortune is going to come from. Fortuitously, a second person in Chicago tracked me down when he found our unit on one of several Web sites where I’d posted it. He called our toll-free number and announced that he was looking to acquire all the units in the building: ours, the other guy’s, and the bank’s.

But what do you suppose he wants to do with it? It turns out that he works with an extremely well-connected non-profit organization in Chicago, one that understands the arcane mazes governing getting city and county money for grants. He wants to convert the building into a halfway house for women released from prison. Currently, thanks to urban unemployment rates and Obama’s stimulus plan, he has access to some extraordinarily skilled laborers who’ve signed up with his group to provide low-cost labor to renovate buildings like this one.

It’s a win-win-win. DBNR sells its unit; it gets a finder’s fee for linking the guy with 18 units to the guy who wants the building in toto. A cluster of underemployed people get to work. A stream of female parolees gets housing. An empty building gets revitalized.

I still have to figure out how to connect the guy from the non-profit with the bank that owns the foreclosed 19^th unit, but in the scheme of things, that’s pretty minor. The rest of it, and all those fulfilled motives, makes me smile.

All too often those of us here in Silicon Valley congratulate ourselves for living on the cutting edge of technology. We all have neighbors who work for either companies with household names or unfamiliar start-ups, around whose work there is a great deal of secrecy - until there’s a flashy story in the Wall Street Journal.

Sometimes it can be hard to keep up, which is why every year I attend the day-long technology “boot camp” sponsored by the Silicon Valley Small Business Development Center, part of the U.S. government’s Small Business Administration. For $49, it’s the most cost-effective resource I’ve run across, because I’m sure that it would cost thousands of dollars to learn the same thing at other seminars.

We learned about issues most likely to affect our businesses, such as cloud computing, how Skype works, and how those and other technologies are changing the economics of small business. But a couple of days later, I started having a nagging feeling that something was missing. Several years ago, I heard Scott McNealy, former chairman of Sun Microsystems (now a division of Oracle), say, “People don’t want computers. They just need them to get what they do want.” McNealy wanted to figure out a way to deliver the information and essentially make the computer invisible. (I hope he wasn’t thinking about human-chip implants.)

I don’t want to sound cynical, because the Internet has made it easier than ever before for entrepreneurs like me to start businesses. But it seems to me that the Internet has only provided about half of what the real estate industry needs. It’s revolutionized the ability to find and finance homes. Even at DBNR, we can now post a video about our houses at a single site and have it syndicated - that is, distributed automatically - to dozens of other sites. It’s an amazing time savings.

So what’s missing? Context. Context is one of the things we need most about DBNR property. Certainly, we can find out the basics about a property: who owns it, the property taxes, the water bill. But we can’t find out what the neighbors are like. We can’t find out what the traffic is like. We can’t find out whether businesses are coming into the neighborhood, or fleeing. We need context.

Technology does not yet have a way to deliver what I call human-centered research. If you walked into any neighborhood where DBNR owns a house, you’d be able to discern almost immediately the feeling of the neighborhood, whether there are kids running down the street, or elderly grandmothers rolling their groceries home from a local market. Even then, we would need a method to gauge the source of the contextual information, based on trust, an issue I have strong feelings about and have written about frequently.

Technology is great. But it’s not perfect.

Between wars, oil spills, and economic doldrums, the world seems pretty grim right now. That’s why I was especially interested when Ann Curry interviewed the Dalai Lama on The Today Show last week. This is a man who has had more interaction with the highs (spiritual enlightenment) and the lows (political oppression) of life than most of us ever will. But to my surprise, when Curry asked him about his vision of the next ten years, he was surprisingly optimistic.

He envisioned more peace and harmony for the human race, as well as a lot more people developing relationships in ways we haven’t done for decades - if at all. I also learned that he does not live in a technological vacuum - one of the reasons for his optimism was the reaction of people who rallied to the assistance of earthquake-ravaged Haiti simply by punching a series of numbers on their cell phones. Truly the intersection of the technological with charitable, even spiritual, urges.

To me, his reference was a clear example of people bypassing governments to do some good, to get something accomplished that needed to be done quickly. I sense, like the Dalai Lama does, that we are moving toward a time of greater personal connection. I believe this for two reasons. First, I see technology - whether Facebook or cell-phone contribution systems - bringing us closer together, binding us in ways we’ve never been bound before. But second, I also see us recognizing the need for greater personal connections. Technology is just a way to achieve it more easily.

Now, I’ll be the first to admit that my interest in, and devotion to, personal development makes me think about these issues more frequently than most people. But to me, personal development encapsulates these goals: it’s a commitment to look inside yourself and think more carefully about how you participate in the world outside. That may seem like a contradictory concept, but so too is the idea of using technology (which can be inherently impersonal) to increase personal connection to other people.

So how am I putting this insight into action? Coincidentally, it’s a situation close to home, one related to the story about Haiti I told above. Relatives of mine have experienced a financial, not seismic, earthquake, and they’re in need of help. In the past, they might have gone to a finance company or a sub-prime mortgage company for assistance with their housing situation, but government regulations have managed to create so many “protections” for consumers (and taxpayers) that companies are shying away from situations like theirs. They can’t get help.

This is where the human connection comes in. Though family members might not have done this twenty years ago, when we were all so independent and generations lived apart, I believe it’s time for me to step up and help them, whether to navigate the treacherous waters of the mortgage system, or financially if necessary.

My relationships with my family, my personal connection to them, compel me to help them. The injustice of how they’ve been abandoned by the system - especially a system that thinks it’s helping them - peeves me. It’s up to me to help.

If Michael Anthony gave you one million dollars of John Beresford Tipton’s money today, where would you spend it? I saw a trio of experts on CNBC last week talking about which of these three areas was currently the best investment: real estate, gold, or stocks. The experts agreed that stocks are too volatile, but the consensus was that gold (even though it’s expensive) and real estate were best.

Why? Because at some point, we’ll see inflation, and the two best hedges against inflation are gold and real estate.

Even better from our perspective here at DBNR, the experts also concurred on the fact that we’re bouncing along the bottom of the market in terms of real estate value. According to this column from the Bigger Pockets blog, the Commerce Department says the number of vacant homes eclipsed a record 19 million units in the first quarter of 2010. That’s a near-record 10.6% vacancy rate, where 8% is considered normal. At the same time, rental property vacancy rates are hovering around 11%, the highest they’ve been since 1956.

Hopefully, this is the point at which we’ll start to see some bounce back. The CNBC experts predict that both commercial rental and vacant vacancies will decline, which represents the beginning of a cycle where rents increase and property values start to escalate.

Except for one little glitch.

The banks - especially the ones flush with bailout money - don’t seem to be putting it back into the system. We’re hearing lots of anecdotal evidence of loans (especially jumbos) being hard to get, particularly if the applicant is self-employed. The banks are being particularly persnickety about loaning money to people whose income dropped last year - but that includes most of the people we know, whether they’re self-employed or had to take pay cuts.

That actually is good news for DBNR. If people with money can’t get loans, they rent in the interim. The more people who do that, the faster vacancy rates go down and rents go up. And because companies like ours that circumvent the traditional lending process, we can provide housing and rental property for those who want to buy or invest.

The handwriting on the wall is clear. Prices and interest rates are still low. When there’s a sincere recovery, it’s sure that higher interest rates and higher property values will follow. Anybody who can buy now should take advantage of real-estate’s long-term advantages, both as an investment vehicle and an inflation hedge.