The Sun Sentinel published an excellent overview of the current crisis for many Florida homeowners today in a piece written by Paul Owers, entitled “Homes bought five years ago the hardest to sell.”  Owers covers the situation that many property owners throughout Florida face:  they owe a lot more on their mortgage than their house is worth today in the marketplace.  It’s an article that’s worth the time to read.

Florida Underwater Homeowners Search for Solutions

As the Sun Sentinel article points out, Florida homeowners aren’t just sitting on their hands: lots of people are searching for ways to solve this widespread problem.  However, so far nothing has proven to be successful in solving the underwater mortgage fiasco.  For instance:

1.  Renting the house

Renting the property out hasn’t worked for most.  Most still lose money here, since the amount of the rent cannot cover the full cost of the home (mortgage, taxes, insurance, upkeep, etc.).

2.  Short sale

Short sales are when the homeowner sells the property for whatever it will bring, and takes the loss between the amount due on the mortgage and the sales price.  This gets the homeowner out of the home, but it’s still a big loss for the homeowner because of deficiency judgment issues.

3.  Riding out the storm

For many, staying put and writing that mortgage check each month while living in a home that is not worth the amount on the home loan is painful but it’s the only realistic option for now.  Homeowner’s are in the red, and staying vigilant for solutions on the horizon — solutions that are acceptable to them, and that haven’t shown up so far.

4.  Walking away

A significant number of homeowners are so frustrated that they are simply moving from their home and letting the financial institution do as it will.   Walking away from the mortgage may mean that they don’t have to write that monthly mortgage check the next month; however, the banks may sue for a deficiency judgment and defaulting is a risky proposition.

5.  Filing bankruptcy

Some underwater mortgage holders opt to file Chapter 13 bankruptcy.  It’s not an optimal solution, though, since this option severely impacts credit and the mortgage may not disappear.  Under federal bankruptcy law, the homeowner can stay in his homestead — but that mortgage payment is going to have to be paid, and missed mortgage payments will probably need to be made up over time.

Where’s the Help from the Government?  It’s Not There.

Attempts by the federal government to help these underwater mortgage holders haven’t been successful so far.  As the Sun Sentinel points out, the Federal Housing Administration’s “short refinance” program has been discontinued (a program to help underwater homeowners who were current on their mortgage payments).

And that big ForeclosureGate settlement that the Attorneys General from all 50 states had pounded out with the banks and mortgage servicers?  While the exact amount of money that is on the table remains a rumor — $20 million, $30 million — it appears that the federal government wants to grab that cash, and none of it has been earmarked (yet) to help any of these underwater homeowners.