There is not much you can do. In order to refinance your home for a lower loan amount, you would have to pay off whatever loan you currently have. Unfortunately you bought your home at the height of the market, and now the market has dropped off to a point where you home is worth less than your loan amount (I'm assuming based on your question).
If you like your new home, I might recommend that you continue to live there and make your current payments. I am assuming that when you bought the home, you qualified for the loan amount and can afford the monthly payments. If you plan on living there for several years, hopefully by then, your home will come back up in value, and even appreciate over the original purchase price.
You might want to check out
and see if you qualify for the renegotiation of your loan. It is the Federal Housing Administration page for Hope for Homeowners, If your lender doesn't do it, there might be a lender on the list that you can talk too and see if they can work with you.
Part of refinancing you property includes paying off your current mortgage(s). The new lender will only lend you based on the current value of your home, so to refinance the traditional way you will have to come up with the difference yourself, in this case over $120k - which is not an option to most people.
The best advise I can give you is to call your current lender. They might be able to modify your current loan. Another alternative is a short sale, but again to do that you will have to demostrate a hardship - with documentation (pay stubs, tax returns, bank accounts, etc...).
I know it is not the best situation, but talking with your bank should be your first step.
If you can pay your mortgage just fine, and are unhappy that your investment has lost value...well, that's a different story. Nearly every home owner in the US is unhappy their home has lost value.