After the housing bubble began to burst in 2006, sending prices plunging for several years, a lot of people were left with mortgages that were underwater — meaning that the value of their home had dropped to less than the owner’s equity in it.
Being in that situation causes a number of problems. The first is that selling a property that’s worth less than your loan balance either requires the seller to put cash in or the bank to agree to a short sale — in which the home is sold for less than the borrower owes, and the mortgage-holder forgives the difference.