There's no gentle way to put this.
Nearly 11 million Americans are living in homes that are underwater, which means their home is worth less than the balance remaining on the mortgage. That's about 22.5 percent of all homes carrying mortgages. In a healthy market, it's about 5 percent.
In Florida, the situation is far worse: Nearly half of all homeowners are underwater, state records show.
Take those plummeting home values that make recovering your investment difficult or impossible, add Florida's 12 percent unemployment rate and you have a serious wakeup call. It comes once a month, and it's called a mortgage payment.
If you can't afford to pay your mortgage, you have essentially three choices, and none of them is good.
But that doesn't necessarily mean the end of your financial world.
In descending order of desperation, your options are a short sale, a foreclosure and, way down in the depths, squatting.
With each option, you'll probably lose money, your credit score will suffer and you'll have to find somewhere else to live. In the case of squatting, that place could even be jail.
There are lots of variables involved, but many times, the choice comes down to a very personal question: Do you want to just walk away from your home or do you want to try to satisfy your debt and salvage something?
Or is that even possible?
This much is certain: More than half the homes sold in the Tampa Bay area in September — 52 percent — were either foreclosures or short sales.
This isn't someone else's problem anymore.
Here are some pros and cons of these options.
This is simply selling your home for less than the balance on your mortgage. Experts say this is the best option, if it's available, for the homeowner and the lender. Homeowners usually don't take huge hits on their credit scores, and lenders get a far better return on their investments than a foreclosure would bring.
But first you have to communicate. Contact the lender immediately and see if it'll agree to terms.
If you owe, say, $200,000 on your home and sell it for $150,000, the lender keeps the proceeds. But that still doesn't let you off the hook.
You owe the bank the remaining $50,000. That's called the deficiency. Under Florida law, lenders can try to recover the entire deficiency. But many times, to avoid foreclosure, they negotiate with the homeowners and reduce some or all of the remaining balance.
"The biggest positive is that a short sale gets people out from under debt and a property they can't support,'' said Realtor Nancy Baird of the Baird Realty Group in St. Pete Beach. At least 20 percent of her business is short sales.
Lenders prefer a short sale, Baird said, because the process is usually quicker than a foreclosure, the courts aren't involved, and the lenders walk away with as much as 20 percent more money than a foreclosure would bring.
On the downside, homeowners must talk with their lender, usually an embarrassing conversation, and they must keep making mortgage payments until the property is sold. And in what may be a signal that housing prices have stabilized, "the banks have forgiven less and less (of the deficiency) from what I've seen,'' Baird said.
But Baird and other real estate experts say short sales are keeping the housing market afloat right now.
Another downside is that the lender can want a larger cut of the deficiency at a later date, or a potential buyer can walk away from the deal as the homeowner and the lender go back and forth. That process can take months.
But in most cases, the homeowners get notification from the lender beforehand, telling them what it's willing to do based on what it thinks the house is worth.
This usually happens when a homeowner stops making payments and can't or won't communicate with the lender to try to work out a deal. Foreclosures have become a drawn-out, complicated mess. First, the courts — already overburdened with cases — have to sort out who owns the home and if there are any liens against the property. Because many banks collect mortgage payments but don't actually own the property, that can take months.
Once ownership is established, the home is the primary lender's responsibility. While it tries to sell it, either through normal real estate channels or at auction, it has to secure the home, keep it up to code and pay the taxes and insurance. In the meantime, the lender gets nothing in return.
And the homeowner gets even less. When a homeowner gets a notice of default, usually after not making mortgage payments for 90 days, credit bureaus find out. A foreclosure can drop a credit score by 200 to 300 points, according to consumer experts, and can remain active on a credit report for seven years.
A foreclosure can be stopped, at least temporarily, by filing a lawsuit or filing for bankruptcy. But for either option to work, a homeowner has to come up with a payment plan to settle the debt.
To avoid foreclosures, lenders have been under pressure by federal regulators to modify loans for homeowners.
But that, experts say, has been slow to happen.
The biggest problem with short sales and foreclosures is that no two cases are the same, and there's no easy solution.
"It's an ethical question of what is the right thing or wrong thing to do,'' said Randy Anderson, professor of real estate at the University of Central Florida. "Should you continue to pay or make a decision not to?''
This is a calculated risk that a surprising number of people are willing to take. There are two types of squatters: those who stay in their home while it's in foreclosure and those who find empty homes and take up residence.
"Arguably, the homes and the neighborhood are better off having the homes occupied than having an abandoned home without any electric power rotting on the block,'' Roy Oppenheim, a Fort Lauderdale foreclosure defense attorney, wrote on his blog (southfloridalawblog.com). "Legally, it can get interesting because after a few days the banks can lose the power of the sheriff, and the squatters need to be legally ejected through a formal court proceeding.''
Moving into someone else's empty house has become a particular problem in South Florida. Using a centuries-old concept called adverse possession that lets people take over abandoned property if they live there and pay the taxes, claims were filed recently on about 200 homes in Broward and Palm Beach counties. The plan was to rent or sell them.
But three of the four people who made the claims were arrested when it was learned that those 200 homes were in foreclosure. Someone else owned them.
St. Petersburg freelance writer Tom Zucco is a former longtime reporter for the Times. He can be reached at email@example.com.