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Crushing Debt Alone

Forida drowning in underwater mortgages

When a family income is reduced by the loss of employment, underemployment or an unforeseen increase in medical expenses, they can end up getting behind on their mortgage payments. And while bankruptcy is one way to halt a foreclosure, a mortgage modification can also help a person avoid foreclosure.

For many Florida residents, in addition to struggling financially, they can be frustrated when their mortgage is underwater, which means the amount owed is higher than the estimated value. A recent study by CoreLogic, reported that 44 percent of Florida homes have underwater mortgages. Only Nevada and Arizona have more underwater mortgages than Florida. Nationwide, the study reported that 11.1 million mortgages, or 22.8 percent, are underwater. For homeowners in this situation, the report indicates few options for relief.

The option most homeowners would probably prefer, refinancing the underwater mortgage, is not a realistic option. Another option is Chapter 13 bankruptcy; which would halt foreclosure actions, and buy the homeowner time to negotiate alternative solutions to their mortgage and other debt issues. The report suggests that a third option is to continue making mortgage payments and hope for an eventual increase in property value. An attorney can assist homeowners with other options which include a short sale or deed in lieu of foreclosure.

The report indicated that foreclosure actions are likely to rise due to a $25 billion settlement with three large lenders: Chase & Co., Bank of America Corporation and Wells Fargo & Company. The hope is that as the foreclosure pipeline clears, the number of underwater mortgages will decline.

Source: Yahoo! Finance, “Underwater Mortgages Surge in 4Q,” March, 5, 2012

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