Olsen's bad-mortgage tally is also a good deal less than the $700 billion bailout Congress is supposed to consider today.

The biggest losses will instead rest on commercial real estate loans and loans on homes bought as investments or built on speculation, without buyers lined up.

Olsen said the report's findings raise questions about whether Congress can justify its massive proposed bailout, especially considering any rescue plan's potential for encouraging risky behaviors later. The study's conclusions also highlight the need to weigh less-costly rescue solutions, such as tweaking accounting rules and removing limits on federal deposit insurance for bank accounts, Olsen said.

"When we look at how homeowners have managed their finances, especially with respect to their homes, they've been a lot more conservative and careful than a lot of financial institutions and investors have been," he said. "Do we really want to tell financial institutions that if they write really shaky loans, we're going to save them? Do we really want to tell investors, 'Gee whiz, go ahead and buy a house hoping to make a killing, and when things go badly, we'll keep you from being foreclosed on?' "

Nevada's three members of the House of Representatives -- Democrat Shelley Berkley and Republicans Dean Heller and Jon Porter -- didn't comment by press time on the study or its authors' suggestions for stemming the country's credit troubles.

David Cherry, Berkley's press secretary, said Berkley would need to review the study's conclusions and methodology before commenting.

Berkley and Heller voted against the $700 billion bill that failed in the House Monday. Porter voted for the law.

Berkley, however, told The Associated Press on Thursday she planned to vote in favor of the new version coming up for a vote today.

The Senate approved a different $700 billion bill Wednesday. Sens. John Ensign, R-Nev., and Senate Majority Leader Harry Reid, D-Nev., voted for the Senate bill. The House is scheduled to vote on the Senate's proposal today.

For their study, Olsen and co-author Lucia Dunn, an economics professor at Ohio State, crunched numbers from the university's Consumer Finance Monthly, an ongoing phone survey asking randomly selected Americans about their household finances. The analysis assumed a July 1, 2007, peak for housing prices nationwide, and it used Consumer Finance Monthly data from July 2005 through June 2008. The study looked at homeowners the authors said were most likely to default on loans: Those who had a loan-to-value ratio of 80 percent or more, which indicates little or no home equity, and homeowners who fell at least 60 days behind on their mortgage payments.

The authors found that 8.5 percent of American home- owners fell into the riskiest category. That's up from 3.4 percent between July 2005 and June 2006.

The economists then assumed all of those homeowners teetering on the edge of default would go into foreclosure, and their homes would then lose 60 percent of their value. Under those parameters, the country could see $90 billion in mortgage losses in 2007 and 2008, and as much as $180 billion in losses if you evaluate the data using the higher late-payment rates of the second quarter.

"That's a lot of money, but it is not disastrous in itself," Olsen said. "This suggests much of the problem we're seeing concerning risky investments doesn't involve owner-occupied homes."

The Ohio State report didn't compile numbers state by state, but Olsen and Brian Gordon, a principal in local economic-research firm Applied Analysis, agreed that Nevada's percentage of homeowners with little equity and mounting late payments is significantly higher than national averages.

Gordon also questioned whether any analysis could accurately count future losses in the country's mortgage market.

The Ohio State study can't measure the number of homeowners who aren't yet delinquent on their home loans, because their adjustable-rate mortgages haven't yet reset to higher interest levels, Gordon said. Plus, as the credit crunch deepens the country's economic troubles, job losses could rise, and that could later ensnare homeowners current on their loans today. And it's difficult to assess total losses when experts aren't clear on whether banks will charge losses based on fair-market values or below-market values.

"There are a lot of moving parts here," Gordon said. "We're looking at a snapshot in time as of today. We certainly have to consider where the market is going to be headed in coming months as well."

The market could improve in coming months, said Olsen, if Congress passes two key measures: Easing the mark-to-market accounting rules that require banks to rate assets and loans at current values regardless of how long the institutions plan to hang on to the portfolios; and removing all limits on bank-account insurance offered through the Federal Deposit Insurance Corp.

Mark-to-market rules cause problems because banks must reduce the value of all mortgages in their portfolios based on the drop in value of defaulted mortgages. That means cheaper assets on paper, and that in turn makes it tougher for banks to borrow.

And removing FDIC insurance limits would prevent major corporate account holders from initiating runs on banks to remove cash from a struggling financial institution. That would protect banks' cash holdings and assets.

"Ironically, this is not about mortgages and foreclosures," Olsen said. "This is about an old-fashioned financial panic. You have to stop a financial panic with different measures. These two measures don't cost a nickel, but they would really put a firebreak in what's going on."

Cherry said Berkley backs raising the FDIC insurance limits from $100,000 to $250,000.

Gordon agreed Olsen's suggestions "have the potential to improve the situation." But they're not necessarily cost-free, he added.

Take those FDIC limits. Removing them altogether could boost banks' liquidity, but it would also raise the question of whether government could afford to cover the sheer number of accounts that might be lost to bank failures, Gordon said.

Still, action is essential, Gordon said. He pointed to other possibilities, including developer Steve Wynn's recent suggestion to Fox News that the government buy preferred stock in battered banks to give them cash, and require in return that the companies slash expenses and renegotiate home loans.

"Doing nothing, while it impacts those who created the issues, also impacts those who had little or nothing to do with the situation," Gordon said. "People's retirement packages are declining in value. People might lose their jobs if companies can't get business loans. The foreclosure market in Las Vegas the last few months has been setting the entire market's new price points. We're seeing large depreciation across the board, and that's affecting all homeowners."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.