CNBC issued a report in May 2010 on the U.S. Cities With The Most Underwater Mortgages. Not surprisingly, Florida appeared on the list more than once.

Orlando ranked #2 in the nation for the highest percentage of underwater mortgages – about 75%. Only 1 in 4 households with mortgages in Orlando have at least $1.00 in equity, and that might be disappearing fast.

So what can you do if you fall into the “wrong” percentage? I have 5 options below, some I like, some I don’t.

1) Do Nothing. Some people would tell you that an underwater mortgage is just a state of mind. If you are in your Orlando home for the long haul, have no problem paying your mortgage, and/or don’t need to sell anytime soon, then sit tight and Do Nothing.

2) Loan Modification/Short Sale. I lump these together because they generate the most interest in people who are in trouble, but I think they produce the least amount of results. Most loan modifications are scams – just an attempt for the lender to get as much money out of you before you default anyway and they foreclose anyway. Band aid on a large wound. Short sales are even worse. Everyone wants to do one. But don’t even bother wasting your time unless you have listed the home for sale at a high price, then dropped, then dropped again, and then found a buyer. The bank doesn’t want to talk to you until you actually have a buyer. That is the key, and it takes too much time.

3) Walk Away. If you can’t pay, then don’t pay. I hope you don’t have any assets and don’t plan to have any assets for the next 20 years. The lender may be able to pursue you for a deficiency when they finally foreclose and sell the property. I almost guarantee that you will get a 1099 reported to the IRS for forgiven debt. Whether you have to pay tax on the 1099 is a different issue for your tax professional.

4) Rent It Out. Are you able to get someone to pay enough that it covers the mortgage payment? If so, you move into something less expensive and the renter is covering your mortgage. But I consider this pretty risky. You are now on the hook for a rental, so what do you do if the renter stops paying? Or the home sits empty in between renters. Too much uncertainty if you ask me.

5) File for Bankruptcy in Orlando. Chapter 13 or Chapter 7 bankruptcy has the most options within an option. You can surrender your Orlando home in either chapter of bankruptcy. Or you may be able save your home in Chapter 13 bankruptcy if you are behind in payments. Or the best result possible is that you may be able to rescue your underwater mortgage by getting rid of your second mortgage in Chapter 13.

Yes, that is right. Try to get your underwater mortgage dry again through chapter 13 bankruptcy. While working to rescue your home, you may also get the added benefit of wiping out credit card debt, medical bills, and other types of debt.

Call 407-749-0080 now for a free consultation.