A Very Common Nightmare!

So many homeowners are upside down financially with their homes but a fairly good majority of them are also suffering from payment shock.  An example of this is that I have a client who purchased a home in Fairfield, California about 7 years ago for $850,000 then put another $150,000 into it.  They did put more than 20% down but when the hosing market went south, the value went down to $550,000, approximately to what they owned on their first mortgage.  Their loan as negatively amortized and they were only paying option 1 of 3 choices-the minimum payment which didn't even cover the interest owed monthly.  Since the (2008), the husband died, the loan was recast to where the payment was about $1700 more per month and the wife had to sell at a loss and walk away with zero proceeds.  The only think that could have been worse is if they defaulted on their payments and the property was subsequently foreclosed on.

What is this world coming to?  The country, most states, and a majority of the population are over their heads in debt and either out of a job or making considerably less than prior to 2008.  To make it worse, the family mainstay, the home is in deep trouble with all the short sales, foreclosures, and lack of construction of new homes throughout the country.  This is a nationwide crisis.  I think the only answer is to tighten out belts, pay off our credit cards, and start paying cash for extras we don't need.