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2nd Mortgage Borrowers See Worse Negative Equity

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The number of outstanding mortgages increased during the first three months of 2011, though the value of those loans was lower, CoreLogic reported Tuesday. Much of the country’s negative-equity problems are concentrated in loans with subordinate financing.

The report said the number of properties with loan-to-value ratios in excess of 100 percent fell to 10.9 million in the first quarter. Three months earlier, the count was 11.1 million, while it was 11.3 million in the first-quarter 2010.

A total of 48 million financed properties were included in CoreLogic’s data. The Santa Ana, Calif.-based service provider claims its database accounts for 85 percent of all outstanding U.S. mortgages.

The negative-equity population represented 22.7 percent of all residential properties with a mortgage, down from the fourth quarter’s 23.1 percent. A year earlier, the figure was 24 percent.

CoreLogic said that another 2.4 million borrowers had less than 5 percent equity as of the latest period.

“Not only was the decline in prices a clear force driving negative equity, but borrower equity extraction also significantly increased the risk of a negative equity position,” the report stated. “While only 18 percent of borrowers with no home-equity loans were underwater at the end of the first quarter, 38 percent of borrowers with home-equity loans were in a negative equity position.”

CoreLogic said that more than 40 percent of all negative-equity borrowers have HELs.

Chief Economist Mark Fleming noted in the study that negative-equity alone doesn’t indicate a problem borrower. It’s when a negative-equity borrower is hit with a life event that 100-plus-percent LTVs become a factor.

The collective U.S. LTV was 69.7 percent during the first quarter, about the same as the fourth quarter.

By state, Nevada’s 115 percent LTV was the worst. The report indicated that 63 percent of Nevada borrowers were underwater, while the ratio jumped to two-thirds in Las Vegas.

Arizona’s average fell within the solvent category at 94 percent, then Florida’s 89 percent, Michigan’s 84 percent and Georgia’s 81 percent.

On the upside, New York’s 48 percent was lowest, then Hawaii’s 54 percent and Washington, D.C.’s, 59 percent.

No data was presented for seven states.

The five-worst negative-equity metropolitan areas were all in either California or states adjacent to the Golden State.

Outstanding mortgage debt was 48,012,368 loans for $8.7244 trillion. There were 47,913,991 borrowers who owed $8.782 trillion on their mortgages as of the fourth quarter report.

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