Such an expression is widely used in China mainland, and is a informal legal term.

--------------------------------------------------
Note added at 2天8小时 (2009-04-20 01:19:46 GMT)
--------------------------------------------------

对Karen Ho的答复，原来的地方太小，所以放到这里：
1、Underwater 不代表承債人喪失"贖回權(贖回什麼??)。首先要澄清的是，这个词不是指债务，而是指抵押品的价值低于原来的贷款金额。例如，A原来以X房产作价100万贷款100万，购买Y房产，现在房价下降，X房子只值50万，除非我再提供50万的抵押（可能很多人不能提供），银行就要将X房产收回。所以，我丧失了X房产的赎回权。 Underwater不是针对债务，债务关系依然存在而且不受影响，该还月供还得还，Y房产仍然是我的。否则，即使房价下跌，如果你不用它去抵押贷款，也只是自己的资产贬值，而不会发生任何危机。所以，对这个问题，丧失的是抵押贷款的抵押品赎回权。
2、Underwater在这几个例句中都是动词。“套牢”是一个动词，一般是指自己手上的资产急遽贬值却无法出手。在这里不够确切。“断头”这个词的意思倒是符合这里的意思，如;"如果辜濂松无法在时限内补足，就要面临断头."，“换句话说，如无意外，今年下半年，中信金股价连番破底，频创历史低点，不待最近，辜濂松这位中信集团大家长，很可能老早就已接到质押银行的“断头令”。”（见http://gb.chinareviewnews.com/doc/1007/7/8/3/100778317_2.htm...），这里的“断头”、“断头令”实际上指的就是丧失抵押品赎回权，银行收回抵押品的命令。但是在Google上分别搜索这两个词，你会发现，“断头”用的程度，远不如“丧失抵押品赎回权”多，特别是在大陆地区。而且，我觉得，“断头”（或者说“面临断头”）在中文中的意思过于强烈（比Underwater在英文中的色彩要强烈得多），所以，我觉得不如放弃俗语对俗语的惯例，改用平直的话表达，也就是“丧失抵押品赎回权”
3、关于第三个例句，我同意你的理解，但修正为，是指抵押房的价格于贷款金额最多5%，但我的译法无法很好地表达这个意思。所以翻译时只好详细解释为“抵押房产价格低于抵押贷款金额5%的房主”。
总结一下，Ho 兄可能没有正确理解，Underwater的背景是抵押贷款。要是不涉及抵押的买卖，即使房价再跌，也只是资产的损失，不会造成需要救援的危机。但我的译法，是在其确切意思，“抵押房产价值低于抵押贷款金额”引申而出的，在有些地方可能不甚适合（“断头”也同样不适合）。所以，这个词有时候要用解释的方法来翻译。
请Ho兄指正。

--------------------------------------------------
Note added at 3天11小时 (2009-04-21 04:28:14 GMT)
--------------------------------------------------

To Karen Ho:
1. “Not necessary to explain something we fully understood”, which may I understand as we reaching an agreement regarding the definition of “underwater”, i.e. a mortgaged asset’s liabilities goes beyond its value, so it’s negative valued?
2. I admit that “foreclosure” is the better translation for “丧失抵押品赎回权”, (BTW, your opinion is also apply to 断头, furthermore, 断头 is not so commonly used in China, especially in mainland, as it's a "bad" word, even a curse for any Chinese people.) but it seems to me that it’s hardly to find an accurate equivalent in Chinese for “underwater” (with it's meaning in the example sentences) . So I do some balance with this translation (after all, translation is the art of balancing, or dancing on the blade’s edge.), using its result to refer to it, which may indeed be not so appropriate or exact.
3. If that translation can’t be satisfying, I would like to propose a new word create by me, “沦负”， which means a mortgaged asset’s liabilities goes beyond it’s value, so it’s negative valued (for a asset, like in example sentence 3), also implies "沦为负翁", who's assets are negative valued (for people, like in exapmle sentence 1 and 2).

Housing prices have plummeted and some homeowners are severely underwater - meaning they owe more than their homes are worth.
房价暴跌，房屋业主大量“沦负”——也就是他们的欠款高于他们的房屋价值。

One in five U.S. mortgage borrowers are underwater
五分之一的美国抵押借款人“沦负”。
Obama’s plan permits refinancing only for homeowners underwater by a maximum 5 percent. Rosen recommends raising that limit to 25 percent
奥巴马的计划近允许对“沦负”最多5%的房屋业主提供再融资。罗森建议将这一上限提高至25%。

First of all, it seems to me that Enrique’s definition is not so exact, since the definition can&#039;t perfectly match his examples.<br /><br />“Underwater”, in Wikipedia, means “assets (particularly real estate) with negative equity” (see also <b><a href="http://en.wikipedia.org/wiki/Negative_equity)," rel="nofollow noopener" target="_blank">http://en.wikipedia.org/wiki/Negative_equity),</a></b> furthermore, one of his example points out that it means “owe more than their homes are worth”。 So, I think “underwater” means the value/price of a mortgage is less than the loan, and the mortgagor loses the right of redemption to the mortgage. In Chinese, it means “丧失赎回权”。<br /><br />This translation can match the example very well.<br /><br /> Housing prices have plummeted and some homeowners are severely underwater - meaning they owe more than their homes are worth. <br />房价暴跌，房屋业主大量丧失赎回权——也就是他们的欠款高于他们的房屋价值。<br /> One in five U.S. mortgage borrowers are underwater <br />五分之一的美国抵押借款人丧失赎回权。<br /> Obama’s plan permits refinancing only for homeowners underwater by a maximum 5 percent. Rosen recommends raising that limit to 25 percent <br />奥巴马的计划近允许对最多5%的丧失赎回权房屋业主提供再融资。罗森建议将这一上限提高至25%。

Such a new is inspired from a commonly used word 沦为负翁, but it has some different meaning, especially when referring to an asset.

As a new word, any Chinese speaking people can easily understand its meaning from the context.

Finally, 沦负 can visually reflect the "underwater" state.

To Karen Ho:
I really thank you for your time and patient. I know 套牢 is much more commonly used, but its definition, as you said, " hate to hold but you can't let go (sell) " can't reflect the meaning of "negatively valured". There are significant differences between 套牢 and 负资产（沦负）, one of which i think is that 沦负 is objective, meanwhile 套牢 in a great deree is subjective. For exapmle, in example sentence 3, “套牢不超过 5%” is very confusing.

I still insist on my understanding of the word underwater, ie, an asset or whose aseets' liabilities go beyond its value.

Thank you again. Maybe we can be good friends. as a chinese saying said “不打不相识”.

在抵押借款中，某项资产的负债超过其价值，或某人名下资产的负债超过其价值。<br />A mortgaged asset&#039;s liabilities goes beyond its value, or one&#039;s mortgaged assets&#039; liabilities go beyond their value.

I try to translate two example phases：
some homeowners are severely underwater—— 一些房主的房产严重贬值；
One in five U.S. mortgage borrowers are underwater——每五个美国的按揭贷借款人就有一个的房产贬值

In my opinion, &quot;somebody is underwater&quot; can be paraphased into &quot;somebody&#039;s asset is devalued and depreciated&quot;. For example, &quot;房主的房产严重/大幅贬值&quot;, when we say homeowners are severely underwater.

The expressions I provided are widely used in Taiwan, and possibly the southern provinces of China, where Taiwanese businessmen are active.

--------------------------------------------------
Note added at 68 days (2009-06-24 18:20:02 GMT) Post-grading
--------------------------------------------------

It's hard to find a "universal" translation. In my opinion, 套牢 can be used in stocks, options, real estate, or the other mentioned situations. It could mean 市值低於貸款餘額, or 贬值, or both, or neither.

In daily English, people complain, "I am so underwater in credit card debts" or "I am underwater with my bills." 被卡債"套牢", "套牢"在帳單裡 could work but none of the other proposed phrases can.

UNDERWATER is a slang and its intended meaning oftentimes ambiguous. I agree with all the technical discussions below but in practice, only 套牢 is as colloquial, informal and ambiguous (or versatile, rather) as UNDERWATER. Finding the semantically (and tone) equivalent word in another language is I believe the key objective of translating, a task not necessarily aimed at defining a word legally or precisively. That is the purpose of a dictionary.

套牢是资產市價跌到購入成本以下 如果本金來自借款 当担保品市價低於貸款或融資(証券交易)額時 投資人將面臨断頭危机 即標的資产所有權將由貸方取得