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

Over one-quarter of all mortgaged homes in the U.S. are now either underwater or close to it according to data released today by CoreLogic.   In the third quarter of 201110.7 million homeowners, 22.1 percent of all those with mortgages, owed more on that mortgage than the market value of their homes. This situation arises when prices decline, mortgage debt increases, or a combination of the two.  An additional 2.4 million homeowners were in a near-negative equity situation with mortgage balances only five percent or less below the value of the home.  In total, homes with negative or near negative equity account for 27.1 percent of all mortgaged property, down from 27.5 percent in the second quarter.

"Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness. The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy," said Mark Fleming, chief economist with CoreLogic.

While negative equity can be the result of multiple mortgages on the property, 6.3 million borrowers (59 percent) have only first mortgages.  However those borrowers represent only 18 percent of all borrowers with only one mortgage on their home. These loans have an average balance of $222,000 and are underwater by an average of $52,000, an average loan-to-value (LTV) ratio of 131 percent.  First liens without home equity loans account for $329 billion aggregate negative equity out of the national total of $699 billion.

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

Negative equity homeowners are more likely to have above market interest rates than other homeowners.  Twenty-two million borrowers (45 percent of the total) have LTVs above 80 percent and 69 percent of them have mortgages with above-market interest rates compared to 54 percent of homeowners with less than 80 percent LTV.   While above-market interest rates make refinancing at today's historically low rates a cost-effective step for qualified homeowners, it can be more difficult for borrowers with above-average LTV ratios to qualify for refinancing.

Conventional loans account for 8.6 million of the negative equity loans.  These have an average outstanding balance of $272,000 and have an average negative equity of $70,000.  The 1.5 million negative equity FHA loans have an average balance of $170,000 and negative equity of $26,000.  CoreLogic estimates that 1.6 million properties valued at an aggregate negative equity of $105,000 are housed in bank portfolios.

Nevada has the highest negative equity percentage with 58 percent of all of its mortgaged properties underwater, followed by Arizona (47 percent), Florida (44 percent), Michigan (35 percent) and Georgia (30 percent). This is the first quarter that Georgia entered the top five, surpassing California which had been in the top five since tracking began in 2009.  These five state combined have an average negative equity ratio of 41.4 percent, while the remaining states have a combined average negative equity ratio of 17.6 percent.

CoreLogic based its analysis on its data base of 48 million properties with a mortgage which includes over 85 percent of all mortgages in the country.  Current home values are derived from CoreLogic Automated Valuation Models for residential properties.