This economy is incredible! How did we get here and what do we do now? We all know now that the general real estate market saw prices skyrocket in the late 1990's and started to decline in 2005.

Let me take a step back for a moment, in 1995 we were making a transition from Northern California to San Diego, because this is where my husband was being relocated for employment. It took us 11 long months to sell our home in the previous declining market.

When we relocated here, after selling our other home, we purchased a home here in 1996, right before prices took off into the stratosphere, but before long we thought about reinvesting some of our new found "equity" into more real estate, so we refinanced our home to take cash out and purchased an investment property. We rented it out and things seemed to be quite manageable. Soon, the investment property began to gain its own equity and that's when we decided to refinance that property and invest the "take-out" cash into another property.

That's probably where we made our mistake. I have to admit, at the time we did not feel there was a danger in financing our investment property with a now famous "option arm" type loan. We were told that we could keep the same payment for 5 years. That was good enough for us; no where in our loan processing did anyone tell us that there was an "acceleration" clause in our loan.

Basically, the acceleration clause allowed the lender to change the rules. It meant that if the loan reached a certain uncomfortable level for the lender that they could demand higher payments immediately. Never mind that we put down 25% in cash to purchase the property; never mind that we had not yet reached that level. It didn't matter that we were never late on any payment. Of course, no one expected Mr. Bernanke to go hog-wild on his short-term rate increases to "control" inflation - but no one can deny, those rate increases brought us to where we are today. Thanks Ben!

Needless to say, I can surely empathize with what some homeowners have been going through, especially the ones who used the "option arm" loan to purchase their primary residence. Somewhere along the line the lending rules changed. Obviously, lenders had a double-standard brewing. The fact that banking institutions made it so easy for buyers to obtain "stated" loans, just so that they could turn around and sell those risky loans to investors, was where today's subprime meltdown and some major non-responsibility began. In other words, it was fine for them to lend out money, as long as they didn't have to carry the burden of getting repaid.

So, what are today's options for homeowners in this situation?

1. You can hold on to your home, and rent it out and possibly take a negative cash flow if you can afford it.

2. You can negotiate with your lender to try and change the terms of your loan. Understand that the lender may not speak to you until you are actually late on your payments for your mortgage.

3. You can try to sell your home as a "short sale".

Granted, these are not ideal choices, but the worse thing one can do, is to ignore the problem. When we do this, the problem only becomes the "elephant in the room" - something that gets so big we can't ignore it - but in this case, it gets so big we can't push that elephant back out through the doorway. He will just keep growing and growing until there's no room left for us and then we're unable to live there anymore. Most likely, this kind of behavior will often lead a homeowner into foreclosure.

Lisa Hayashi

CENTURY 21 Award