CoreLogic: 28% of U.S. Homes now Underwater

With home prices nationwide continuingrnto decline it is not surprising that the number of homeowners who arernunderwater (i.e. owe more on their mortgages than the value of their home)rncontinues to increase.  CoreLogicrnreleased Quarter Four data this morning showing that 11.1 million or 22.8rnpercent of all U.S. homes with a mortgage were in a negative equity positionrncompared to 10.7 million in the third quarter and an additional 2.5 millionrnborrowers were in a near-negative position. rnTogether these negative and near-negative homeowners own 27.8 percent ofrnall mortgaged residential properties compared to a total of 27.1 percent inrnQuarter Three.   The total mortgage debt outstanding these propertiesrnrose from $2.7 trillion in the third quarter to $2.8 trillion in the fourthrnquarter. </p

Not all negative equity is the result ofrndeclining prices.  Some mortgages are underwaterrnbecause of negative amortization of their mortgages, non-payment, orrnrestructuring of debt to avoid foreclosure. rnThe level of negative equity is a concern because it is at the root ofrnmany mortgage defaults.</p

CoreLogic said that, based solely on loan-to-valuernratios (LTV), it estimated that 18 million borrowers might have been eligiblernfor refinancing under the guidelines of the original Home Affordable RefinancernProgram (HARP).  Under LTV guidelines forrnthe newly expanded HARP which removed the earlier 125 percent LTV cap, over 22rnmillion borrowers may now be eligible to refinance.</p

Borrowers with multiple liens on theirrnhomes are more likely to be in a negative position.  Of the 11.1 million underwater borrowers, 6.7rnmillion have only a first mortgage lien.  This group has an average mortgage balance ofrn$219,000 and negative equity of $51,000 or a LTV of 130 percent.  These underwater borrowers represent only 18rnpercent of all borrowers with only a first lien on their home.  Forty-one percent of these borrowers had anrnLTV in the fourth quarter of 80 percent or higher.</p

Among all borrowers with both a firstrnand second lien on their home 4.4 million or 39 percent were in a negativernposition.  Their average mortgage balancernwas $306,000 and the average LTV was 138 percent, i.e. negative equity ofrn$84,000.  Over 60 percent of borrowersrnwith two liens had combined LTVs of 80 percent or higher.</p

The highest percentage of underwaterrnhomes is in Nevada where 61 percent of mortgaged homes have negative equityrnfollowed by Arizona (48 percent), Florida (44  rnpercent) Michigan (35 percent) and Georgia (33 percent.)  Not surprisingly these states have all rankedrnhigh in the incidence of foreclosures.   </p

Mark Fleming, CoreLogic’s chiefrneconomist said, “Due to the seasonal declines in home prices and slowingrnforeclosure pipeline which is depressing home prices, the negative equity sharernrose in late 2011. The negative equity share is back to the same level as Q3rn2009, which is when we began reporting negative equity using this methodology.rnThe high level of negative equity and the inability to pay is the ‘doublerntrigger’ of default, and the reason we have such a significant foreclosurernpipeline. While the economic recovery will reduce the propensity of therninability to pay trigger, negative equity will take an extended period of timernto improve, and if there is a hiccup in the economic recovery, it could mean arnrise in foreclosures.” </p

CoreLogic’s database includes 48rnmillion mortgaged properties, approximately 85 percent of the U.S. total.  Information on liens was gathered from publicrnrecords and current home values were estimated using CoreLogic’s AutomatedrnValuation Models for residential properties.

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