Feb. 22, 2008 -- It's a real estate reality facing millions of Americans. Their homes are now worth less than what they owe on them.
Mark Zandi, chief economist of Moody's Economy.com, said, "The last time we saw so many homeowners with so many home values that were worth less than the amount of mortgage they owed was back in the Great Depression."
Economists believe nearly 8.8 million Americans are now saddled with homes worth less than their mortgages. Chere Ferraiulo is among them. She, her husband and three teenage children live in Littleton, Colo., on a street where inside home after home live homeowners facing the same disturbing scenario.
When the Ferraiulos took out a new mortgage on their home in 2005, it was worth $244,000. Just three years later, theirs is a much different story.
"I think I've lost $25,000 to $30,000 dollars, if not more," Chere Ferraiulo said.
They've begged their mortgage lender to modify their loan as they try to stave off foreclosure.
Pressure in Washington to help hundreds of thousands of families is mounting, because lawmakers know home values are bound to consumer confidence and spending. But with homes worth less than what people owe, how can they spend elsewhere?
The lenders and banks could voluntarily refinance mortgages, but the banks would take a major hit. The lenders could sell the mortgages to the federal government, which could then refinance those mortgages with fixed rate federal loans. Again, the lenders would take a major loss.
"We have to reduce the mortgage amount that's owed by the borrower," Zandi said. "Under the current terms, the borrower isn't going to make it."
In Christine Canavan's case, it was she and her husband who took that loss.
Canavan remarked, "We actually had to come to the table with about $20,000."
They wanted out of their adjustable rate mortgage to avoid foreclosure. Even as they hammered out details on a new fixed rate mortgage, they watched their home value drop.
"While we were waiting for our rate to lock in, the home was dropping day by day by day," Canavan said. "It just kept dropping."
In just two weeks' time, the value of her home dropped from $250,000 to $220,000 in value. The Canavans are just hoping, like millions of others, that the market will recover.
But those same economists we talked with today say this 10 percent figure -- the 8 million people who are paying more than their home is worth -- is only going to rise.