Depending on the source you choose to believe, there are estimated to be more than 15 million homeowners in this country who owe more than their home is currently worth.

Rather than debate what the exact number of "underwater" properties may be, the reality is there were a lot of homebuyers back in 2004-06 who bet that home prices would continue to climb and a host of misguided lenders and investors that were ready and willing to take that wager.

The daunting problem facing the housing industry and the general economy today is how to unwind the aftermath of the boom years in a fair and equitable manner.

When you consider the dilemma, an underwater homeowner has five choices: 1) bite the bullet and pay the mortgage (not likely if the loan-to-value ratio is greater than 125 percent); 2) default on the mortgage and hope to qualify for a loan modification; 3) mail the keys back to the lender in a "deed in lieu of foreclosure" arrangement; 4) sell the property in a short-sale transaction; 5) or finally, default on the loan and wait for the sheriff to arrive with an eviction notice.

With the exception of the first choice, in all other cases families are displaced, credit scores are destroyed, lenders suffer significant losses, average home prices continue to decline, and neighborhoods are blighted. The magnitude of the problem is daunting, but there is a solution.

The reality is both homeowners and lenders made bad financial decisions. Rather than be at odds now, when the investment has soured, they should partner with each other in a long-term equity-sharing arrangement.

Here is an example: Let's say the homeowner purchased a home in 2004 for $300,000 with no money down and the property is now worth $150,000. That represents a 50 percent reduction in value. In an equity-share arrangement the lender would rewrite a new loan for $150,000 (assuming the homeowner qualifies) and the lender would take a 50 percent ownership interest in the property.

The homeowner would agree to hold the property for at least five years and after that time would agree to split 50 percent of the net proceeds of the sale with the lender. Should the homeowner wish at any time to buy out the lender's interest, a predetermined lump-sum cash payment would be negotiated when the new loan was written.

In this scenario, a number of positive outcomes are achieved:

1. • Homeowners would stay in their homes.
2. • Their credit would be preserved, assuming they stay current on the new loan.
3. • A distressed sale is avoided, as is its chilling effect on property values in the neighborhood.
4. • The lender keeps a performing asset on its books, turning a potentially much larger loss via foreclosure or short sale into future upside potential when the house eventually sells.

We got into this mess one house at a time. The way out is one house at a time. Equity-sharing offers a private-sector solution that won't cost U.S. taxpayers a dime.

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