Home Equity? Not for Millions of American Homeowners

(MoneyWatch)  The news from Zillow this week wasn't good: More than 20 percent of Americans are underwater with their mortgage. In simple terms, that means a fair chunk of homeowners owe more on their mortgages than their homes are worth.

Talk about a stunning turnaround. It was but three years ago, in 2006, that homeowners felt as though their homes were going to appreciate in value forever. We all felt rich, sitting around the kitchen table, swapping stories with our neighbors over who got what for their property and speculating how much we could get for our own -- if we were selling.

If only we could have sold short -- selling our homes at the high but still living there, then buying them back after the market had collapsed.

While the typical American family has the majority of its net worth in its home equity, the recession cut home values by nearly $2.5 trillion last year, according to American Core Logic. Which leads us to where we are today.

Selling your home today isn't about breaking even for a growing number of Americans. It's about possibly being on the hook for tens of thousands of dollars after you've said goodbye to the home you've lived in and loved. If you have any cash stashed at all, even in your retirement accounts, your lender may pressure you to sign a promissory note to pay back the mortgage you owe. If you had private mortgage insurance (PMI), the PMI lender may try to have you sign another promissory note for the cash they put up to cover the top 20 percent of your loan.

(As an aside, I thought the idea of PMI was to protect the lender in case property values sold. Since you pay a substantial premium each month to the PMI company, I'm not sure where the justification is to come back after the fact and try to collect from broke homeowners who paid their premiums each month. Imagine a life insurer who happily collects your premiums, then pays out on a death and sues you to collect what was paid out. But I digress.)

Meanwhile, the stock market continues to act like everything is coming up roses this spring. Signs of life, yes. Full-blown recovery? Not by a longshot.