Mortgage reset: Try to work it out; don't just walk away

— -- Q: Our mortgage resets in about three years and our lender won't work with us to restructure the loan. We can't sell the house, seeing that we owe more than the home is worth. What should we do?

A: Ask Matt is more of a place to ask about stock investing. But since your question is probably on the minds of many readers, I'll offer some suggestions.

What you're going through is at the crux of the nation's banking crisis. Home buyers assuming home prices would only rise, agreed to mortgages that were too pricey for them. Interest rate resets only complicated matters, causing already expensive mortgage payments to become prohibitively expensive as rates reset from low initial rates.

And the problem is getting worse. As homeowners get hit with higher payments — or now, lose their jobs — many are tossing the keys back to the lender and leaving homes abandoned. Not only does that increase the supply of homes for sale, it also leads to abandoned properties. Both pull home values down further.

What should you do? Here are just a few suggestions:

•Consult a professional. Real estate is so local and personal, think about consulting real estate and financial professionals in your area. Are you certain your property would be so hard to sell? Maybe there's something about it that will let you recoup enough to pay back the loan.

•Decide if you really can't afford the mortgage. Consider consulting a financial planner who can help you decide if you can afford the mortgage when it resets. Maybe by making some household budget changes, you can continue to make the mortgage payments.

• Find another lender. While your mortgage lender may not be willing to reduce your payments, perhaps another lender would would. Check with all the big banks to see what options they might provide. Start this soon, though, since they're all swamped with business.

•Wait. Keep paying your current interest payments and hope the housing market turns around before your rates reset.