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Florida homeowners struggle with underwater mortgages

Many Florida homeowners are finding themselves in tough situations. They bought homes in 2005 and 2006 that were once deemed to be good investments, but now those homes have drastically decreased in value. This has resulted in many people owing more than the actual value of their homes, but not being able to qualify for a mortgage modification.

In general this “underwater” mortgage trend is expected to continue on into 2012, and those who have lost equity could be looking at another ten years – if not longer – before they begin to regain what was lost.

When it comes to underwater mortgages, part of the problem is that homeowners are paying the same amount for their now $200,000 home that they once were paying for their $350,000 home. However, since these owners have not defaulted on their loans and/or the home itself has lost so much value – they typically won’t qualify for a mortgage modification.

When it comes to these situations, sources point to only a few options for homeowners. The first is to just accept the bad investment and keep making payments, an option that would not really work for the homeowner who desperately wants to sell in order to move.

The other choice for these types of mortgage situations is to purposely stop making payments and strategically default and let the bank take the home. However, it should be noted that while the mortgage payments would no longer be a concern, choosing this foreclosure route could damage a person’s credit.

Another choice would be to file for bankruptcy as a way to forgive other debts to in order have more money to make mortgage payments. In addition, for some people a bankruptcy filing may be used as a way to prove financial hardship and therefore qualify for a mortgage modification.

Overall there really is no right answer, as what is the best option for one homeowner might not be for another. Before making a decision on what to do with an underwater mortgage, it’s best to look into all choices that are available and then make a decision.

Source: Sun Sentinel, “Homes bought five years ago the hardest to sell,” Paul Owers,” 17 March 2011

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