As the economy continues to struggle, many homeowners are looking at their personal financial status, particularly the value of their home's current and future equity. It is not a pretty picture for most people.

While new to most people's vocabulary, the term "underwater mortgage" has almost become a household word. It refers to negative home equity, when mortgages are more than 25 percent higher than the value of the home.

According to Assistant Treasury Secretary Michael Barr, most people who are in an underwater situation are still making their mortgage payments. Many have taken advantage of the government initiated Home Affordable Modification Program, which is one step toward recovery for homeowners. But how far should these people sink before they decide to throw in the towel and walk away from their investment?

This decision can be very difficult as some are fighting to stay in their home for reasons that include personal pride, moral discipline and just plain stubborn will. They don't want to go down without a fight.

However, the foreclosure numbers are continuing to rise and the stigma of walking away from the financial commitment of a mortgage is becoming less of a disgrace as millions consider the option. Others are staying in their home, rent free, because the wheels of bureaucratic red tape are turning very slowly in the offices of overwhelmed bankers and other lenders.

Last year the bulk of underwater borrowers were in California (at 35%), Florida (at 45%), Arizona (at 48%) and Nevada (at 65%). A report conducted by First American CoreLogic mortgage research firm states that "The owners of nearly 10.7 million U.S. residential properties with mortgages were underwater as of September, with an additional 2.3 million homeowners having equity of less than 5%."

Real estate prices are still floundering, if not going down again, which is a good thing for first-time buyers or investors. But where will they get the financing?

When the banking institutions do lend money for new mortgages, they are now much more cautious. Some say they may be too stringent, given the current position they often find themselves in – becoming owners of homes they previously financed for customers.

However, according to some in the financial world, banks are not doing enough. In December, Donald Trump himself stated that unless the government takes a hard line and forces banks to use the money they were given for lending purposes, the economy would not bounce back.

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