• Owing more on your mortgage than your house is worth is also known as having negative equity.Letras hipoteca1 image by Nuka from Fotolia.com
  
  Thanks to the housing bubble created by inflated home values and so-called predatory lending tactics, many homeowners are now "underwater," meaning they have zero or negative equity in their homes. Though it may often feel like there aren't any options in such a situation, there are a variety of different possible courses of action.
  
  

Stay the Course

• One option available to homeowners who can still afford their payments and for whom a downturn in financial standing is unlikely is to remain in the home. The possibility that local and national housing markets will eventually turn around keeps many homeowners in place and holding out for the hope of refinancing.
  
  

Short Sale

• For those having prolonged difficulty making payments, a short sale may be the best option. A short sale is a situation in which the borrower's mortgage company accepts less than the full balance of the mortgage to settle the debt. The house is sold and the mortgage company receives whatever money is generated by the sale and writes off the remaining balance. Short sales can only be conducted with the consent of the mortgage lender, so contacting them to discover if this is an option is a must.
  
  

Deed in Lieu of Foreclosure

• Some mortgage lenders will accept and negotiate a "deed-in-lieu of foreclosure" agreement, which essentially returns the deed to the mortgage lender to prevent home foreclosure. Differences in state law and lender policy can make this a risky proposition and thorough research is recommended before attempting this option.
  
  

Government Programs

• In February 2009, the federal government began creating and expanding federal programs for struggling homeowners. Assistance is offered to qualifying homeowners who are upside-down on their mortgage, as well as those who are struggling to make payments, unemployed, or with loans guaranteed by Freddie Mac or Fannie Mae. Visit makinghomeaffordable.gov to learn more.