CoreLogic: 27% of Homes in Negative or Near Negative Equity Position

Over one-quarter of all mortgaged homesrnin the U.S. are now either underwater or close to it according to data releasedrntoday by CoreLogic.   In the thirdrnquarter of 201110.7 million homeowners, 22.1 percent of all those withrnmortgages, owed more on that mortgage than the market value of their homes. Thisrnsituation arises when prices decline, mortgage debt increases, or a combinationrnof the two.  An additional 2.4 millionrnhomeowners were in a near-negative equity situation with mortgage balances onlyrnfive percent or less below the value of the home.  In total, homes with negative or nearrnnegative equity account for 27.1 percent of all mortgaged property, down fromrn27.5 percent in the second quarter.</p

“Although slightly down,rnnegative equity remains very high and renders many borrowers vulnerable whenrnnegative economic shocks occur, such as job loss or illness. The nearly $700rnbillion mortgage debt overhang has touched many corners of the market, and thisrnoverhang is holding back the recovery of the housing market and broaderrneconomy,” said Mark Fleming, chief economist with CoreLogic. </p

While negative equity can be thernresult of multiple mortgages on the property, 6.3 million borrowers (59rnpercent) have only first mortgages.  Howeverrnthose borrowers represent only 18 percent of all borrowers with only one mortgagernon their home. These loans have an average balance of $222,000 and arernunderwater by an average of $52,000, an average loan-to-value (LTV) ratio ofrn131 percent.  First liens without homernequity loans account for $329 billion aggregate negative equity out of thernnational total of $699 billion.</p

The 4.4 million borrowers with arnmortgage and a home equity loan have an average mortgage balance of $309,000rnand are underwater by an average of $84,000 with an average LTV of 137 percent.  Multiple mortgage holders with negativernequity represent 38 percent of all multiple mortgage holders.  First equity liens with home equity loansrnhave an aggregate outstanding balance of $190 billion on the first liens.</p

Negative equity homeowners are morernlikely to have above market interest rates than other homeowners.  Twenty-two million borrowers (45 percent ofrnthe total) have LTVs above 80 percent and 69 percent of them have mortgagesrnwith above-market interest rates compared to 54 percent of homeowners with lessrnthan 80 percent LTV.   While above-market interest rates makernrefinancing at today’s historically low rates a cost-effective step forrnqualified homeowners, it can be more difficult for borrowers with above-averagernLTV ratios to qualify for refinancing.</p

Conventional loans account for 8.6rnmillion of the negative equity loans. rnThese have an average outstanding balance of $272,000 and have anrnaverage negative equity of $70,000.  The 1.5rnmillion negative equity FHA loans have an average balance of $170,000 andrnnegative equity of $26,000.  CoreLogicrnestimates that 1.6 million properties valued at an aggregate negative equity ofrn$105,000 are housed in bank portfolios.</p

Nevada has the highest negativernequity percentage with 58 percent of all of its mortgaged propertiesrnunderwater, followed by Arizona (47 percent), Florida (44 percent), Michiganrn(35 percent) and Georgia (30 percent). This is the first quarter that Georgiarnentered the top five, surpassing California which had been in the top fivernsince tracking began in 2009.  These fivernstate combined have an average negative equity ratio of 41.4 percent, while thernremaining states have a combined average negative equity ratio of 17.6 percent.</p

CoreLogic based its analysis on itsrndata base of 48 million properties with a mortgage which includes over 85rnpercent of all mortgages in the country. rnCurrent home values are derived from CoreLogic Automated ValuationrnModels for residential properties.

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