PHILADELPHIA (CBS) — A new real estate report finds that 28 percent of homeowners in the United States are “underwater” on their mortgages. That means that they owe more on their homes than they are currently worth. As 3-On Your Side Consumer Reporter Jim Donovan finds, many homeowners are now torn between paying on a bad investment or just giving up and walking away.

Married with a toddler and a baby on the way, Jakob and Amilia Blackwell are feeling the pressure of living in an underwater home. Amilia says, “I don’t know what we’re going to do at all. I don’t have a clue.” Owing $40,000 more than their home is worth, they’re facing the moral versus business decision of making the payments or defaulting on their loan and walk away. Jakob says, “That’s our main conversation, what are we going to do.”

Money guru Suze Orman says, “If you are thinking about walking away from your house, doing a foreclosure or doing a shortsale, now is the time to do it.” In fact Orman says everyone should be looking at the value of their homes.

A homeowner owing $200,000 on a house that’s now worth only $100,000 is underwater by 50 percent. Orman says, “If you own a home that is 50 percent underwater, 70 percent underwater, it will never ever ever ever come back to where you purchased it.”

Orman says if you’re only 10 or 20 percent underwater, keep making your payments and ride out the housing crisis. But if it’s worse than that? She says, “Do the calculations everybody. How much is it costing you to actually stay in that house? How many years will it take for you to pay more than that house is worth? If it’s 3-years, 4-years, 5-years, are you kidding me, that’s a house you really need to say bye bye.

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Say your house is worth $150,000 and your monthly mortgage, including property tax and insurance is $2500. You will pay $150,000, the current value of your house in five years.In that case Orman says try to get your bank to modify your loan, lowering your monthly payments. If your bank won’t work with you, see if they’ll agree to a short sale, where they accept less money than you owe on your loan. If they won’t agree to that, try a deed in lieu of foreclosure. That is where you sign over the rights to the house, sparing the bank the costs of foreclosing on you. But Orman says, “If they won’t do that, then walk away.”

Orman says if you fail to get your bank to listen, you shouldn’t feel guilty. She says, “You have to make the attempt to work with them, then if they won’t work with you, then I think you can stand in your truth and leave that home”

Walking away from a mortgage isn’t something to be taken lightly. It not only will wreck your credit for years, it also can affect your neighbors by bringing down their property values. So if you’re considering this as an option, check with a credit counselor or tax accountant so you fully understand the consequences.

Reported by Jim Donovan, CBS 3

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