The nation's real estate crisis is so severe that it is dragging the rest of the economy down with it. Banks, which lent out mortgage loans almost indiscriminately, are now saddled with fatal amounts of bad debt because people can't pay these mortgage loans. Many people bought their homes at the height of the real estate boom, when home values were sky-high. Now, the values of their homes have plummeted - and the end is nowhere in sight - and yet they've still got enormous mortgage loans to pay off. As home values fell, their loans didn't. When a mortgage loan is more than the value of the home, the borrower is said to be holding an underwater mortgage.
For example - Let's say you find a very nice, brand new home in the suburbs of Los Angeles. The year is 2005, and the real estate market is on fire. Your home is valued at $675,000. You get a loan for almost all of it, and you're making large payments every month. By 2009, however, the value of your home has tanked, and it's now worth $480,000. Your mortgage is now officially underwater.
Underwater mortgages are on the rise all over the country. Many home owners are faced with the very difficult question of what to do about their underwater mortgage: Should they continue to pay huge amounts of money every month for something that is worth much less than what they will end up paying for? Many home owners are just walking away from their underwater mortgages, and letting the chips fall where they may.
To learn more about underwater mortgages, and what to do about an underwater mortgage, be sure to speak to your banker and see what they might suggest. Also read up on the different programs for underwater mortgage and how to refinance an underwater mortgage so that if you need help on an underwater mortgage, you will at least have an idea what your options are.
