CAPE CORAL, Florida (Reuters) - Long before she filed for bankruptcy, Ann Neukomm was “under water” -- she owed more on her mortgage than her house was worth -- a situation more and more Americans are finding themselves in.

A real estate broker checks a foreclosed California home for damage and missing appliances in a May 2008 photo. REUTERS/Robert Galbraith

As the financial crisis hits Main Street America, nearly one in six U.S. homeowners are finding themselves in the same position, threatening the U.S. economy with a new wave of foreclosures and bankruptcies.

About 12 million U.S. homeowners owe more than their homes are worth, compared with 6.6 million at the end of last year and slightly more than 3 million at the close of 2006, said Mark Zandi, chief economist at Moody’s Economy.com.

“At the root it’s ‘the’ problem,” said Zandi. “If you’re going to put your finger on the one thing that’s gotten us into this fiasco, it’s the fact that millions of homeowners are under water on their homes.”

If, like Neukomm, these homeowners go into foreclosure, it would add to the oversupply of homes, delay a recovery in the housing market, and add to pressure on banks.

Already, U.S. consumer spending is slumping as homeowners find they can no longer take equity out of their homes to fund their lifestyles.

In a slowing economy, it doesn’t take much to push an underwater mortgage into default.

“When you’re under water and you have some kind of hit to your income or some kind of unintended expense, that’s when you default. And so now we’ve got this noxious mix of millions of people under water and quickly rising unemployment,” Zandi said.

Like Neukomm, 57, many people got into trouble by refinancing mortgages to pull out cash when rising property values made it seem like an almost risk-free deal.

She ended up filing for bankruptcy in May after failing to keep up with mortgage payments on her home in Cape Coral, a once-booming town in southwest Florida.

“It’s a dirty word,” said Neukomm of her bankruptcy and personal feelings of failure. “Nobody wants to say it.”

WASTELAND

Cape Coral, built over swampland near Fort Myers on Florida’s palm-fringed Gulf Coast, was fertile ground for the real estate boom, which peaked across much of the United States three years ago.

It is now a wasteland, with barren strip malls, a bloated inventory of unsold or abandoned homes and ubiquitous for-sale signs that speak volumes about the plunge in housing prices and surge in mortgage defaults that triggered the U.S. credit crunch last year.

With current home prices likely to decline on average by another 10 percent, Zandi said there will be 14.6 million homeowners under water by September next year.

“House prices have collapsed and you’ve got many homeowners who bought homes in the last three years who put very little down or have been borrowing against their homes,” said Zandi. “That’s causing this to rise very rapidly.”

Economists like Zandi worry that the underlying housing crisis could eventually prove much more costly to the U.S. taxpayer than the $700 billion the U.S. government has pledged to recapitalize banks and buy up distressed debt from financial institutions.

“The government is going to have to start filling this negative equity hole and that’s just going to be a direct cost to taxpayers,” Zandi said. “This is going to be the really costly part, I think, for taxpayers.”

While the U.S. government has focused its rescue on banks, it has done little to help individuals who are struggling to pay their mortgages, apart from the HOPE NOW program, which has facilitated a few hundred thousand mortgage restructurings.

The government may have no option but to step in, especially if a rising tide of foreclosures and falloff in property and other tax revenues endanger municipalities and local governments and force some into bankruptcy.

Both presidential candidates have outlined plans for relief for distressed homeowners but critics say they have been short on details and there appears to be little consensus about how best to help homeowners who are under water.

DREAM HOME

Among homeowners in danger is Virginia Washington, a 64-year-old medical secretary from California who bought her retirement home in the town of Tolleson, Arizona, in 1996.

“It was supposed to be my dream home, but it has turned out to be a nightmare,” said Washington, who owes $207,000 on a house that is worth about $150,000.

Whereas many families that are now saddled with negative equity simply hand the keys back to the bank and walk away, Washington is haunted by the fear of losing the $65,000 in savings she put down as her deposit.

“Many people did not put any money down on a home and they feel free to walk away. But $65,000, there’s no money tree that grows that kind of money,” she said.

In Stockton, California, a town that has become a posterchild of the U.S. housing crisis, Zillow.com said nearly every homeowner who bought in 2006 is now under water.

There are countless other troublespots across the country.

Nationwide, for those who purchased U.S. homes since the beginning of 2003, nearly one in three now have negative equity. Nearly half of buyers who purchased in 2006 are under water.

Despite tighter credit and underwriting for home loans this year, Steve Berg, a managing director at research firm LPS Applied Analytics, said mortgages originated in 2008 were on par or trending worse than those originated last year or in 2006.

“Presumably the equity position of the borrowers in the loans originated this year should be better,” Berg said in an interview. “That doesn’t appear to be the case, and certainly not to the magnitude you’d expect.”

Foreclosed homes already account for 50 percent of all home sales in some markets, according to Zillow.com, an online real estate research service.

For homeowners like Neukomm, any solution to the negative equity problem will be too late. Any day now, she says she expects to receive a letter giving her 21 to 30 days to abandon the house she bought back in 2000.

“I can make my credit card payments. I just can’t do it with the house,” she said, adding that she was now looking at rental properties in Cape Coral.