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It’s that time of the month again, and we pull out the checkbook to cut that monthly mortgage payment and flush some more of our hard earned cash down that bottomless void known as the “Upside-Down Mortgage.” What can you do to help the situation? What are the viable options? Everyday we’re inundated with TV commercials from banks, savings & loans, and attorneys and mortgage companies. Who’s going to really help? Who’s going to break my wallet? This is the exact situation I’m facing RIGHT NOW.

I haven’t missed any payments, but I’m getting tired and my savings is circling the drain. I’m not going to be able to do this balancing act for much longer. I’ve stuck with my commitments until now, but I need help. I’ve got to find a way to fix this mess, and look at all of my options, and cut a deal with the banks. I’ve never been in this position before, and sometimes I think the banks would be more willing to deal, if I HAD missed a few payments!

My personal “end of the rope” was when my rental homes had each reached over $100,000 in depreciated loss. I figured that even if I kept making the payments, and the market rebounded, I’d be a slave for many years. In other words, if the market suddenly started appreciating again at the same rate or faster than “the good old days”, let’s say 15% a year, it would still take me 6.6 years to just regain the loss. No appreciation, no recovery of expenses, insurance, tenant hassles, taxes, etc. Just pumping most of my paycheck down a black hole. At one point, it just doesn’t make sense anymore. The actual situation is probably worse because in this economy, the days of 15% appreciation are long gone! So what do I do?

That was the dilemma. My mortgage was upside down, and I was stuck in the loan. Perhaps you are in the same position, and owe way more on your house than its currently worth. I sought out and talked to several real estate attorneys, CPAs and realtors for some professional opinions and to get a handle on my options. Here is what they told me, and I hope this information can help you analyze your personal situation.

1. Keep on paying and don’t change a thing: The success of this method really depends on the terms of loan you have now. If you can hack it for the long term, it is something to consider. However you realize, you don’t know when the market will bounce back. In other words, if your house has lost considerable value, who knows when the value will return to at least the price YOU bought it for, let alone the inflated value of “the good old days.” All the experts say, “you can’t time the market.” I guess its true, especially if they themselves were burned as well.

2. You can contact your bank and ask them to modify your loan. It’s not hard at all, you just have to call them and ask for the “loan modification department or loss mitigation.” This is a good option if your less that $100,000 under water. They’ll send you a packet of papers to fill out. Simply send them back, looking as poor as possible and wait. In a few months, they just may come back with a lower interest rate.

3. Short Sale: This is a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and begins the foreclosure proceedings. You find a realtor to represent you and present the hardship package. The realtor prices the home with an aggressive discount and finds a buyer. She presents the offer to the bank, and the bank usually accepts the deal, which is a win-win for everyone. The bank is always interested in short sale instead of foreclosure as it saves them tens of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures or bankruptcy. However, short sales do carry less negative effects than foreclosures. Short sale sellers are widely seen as less risky than foreclosed sellers. 3. Short Sale: You could call this a pre-foreclosure sale. Your late on a few payments, and the bank takes a serious look at you and threatens foreclosure. You find a realtor to represent you and present the hardship package. The realtor prices the home at a substantial discount and finds a buyer. she presents the offer to the bank, and the bank usually accepts the deal, which is a win-win foreveryone. The bank is always interested in short sale instead of foreclosure as it saves them 10s of thousands of dollars in hassle and legal fees, and allow both parties to move on to new business. You should remember that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures and/or bankruptcy. However, short sales do carry less negative effects than foreclosures. Credit to short sale sellers are widely preferred over foreclosed sellers. Case in point, Fannie Mae recently adjusted their guidelines to dictate only a two year waiting period for a short sale seller to buy another primary residence, while they extended the waiting period for foreclosures to five years.

4. Deed in Lieu of Foreclosure: This is the second to the last option, and the bank hates this one. It’s where you simply say, “Here’s the deed to my house, and I’m walking away.” The bank then has to sell the house to recover its losses. The lender forgives the borrower’s note as “paid” and provides the the borrower with 2 documents: One which states that the debt is fully canceled, and one that waives of the right to a deficiency judgment (the lender’s right to ask for the unpaid debt amount if it is not recovered totally by the property-sale)

5. Foreclosure: This is the final option and if you like to go to court, then this is the option for you. In foreclosure, the lender first sends you a summons to appear or foreclosure complaint. The borrower responds to prevent foreclosure and explains the problems at a hearing. The borrower can this point you can still pay the full amount and get the house back during this redemption period. After the redemption period is over, the lender sells the property a public sale or auction and getting as much as they can (or settle for). Any excess goes to you, the original owner/borrower. If the sale amount is less than the loan amount, and in your case it probably will be, you will still owe the balance to the lender. This amount is determined as a result of deficiency proceedings.So as you can see, as we go down the line, the options get worse and worse! As far as my situation, I have to walk away from at least 3 houses. I’m losing a hell of a lot of money, but I’m getting my life back.