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The Negative Equity Journal

The Negative Equity JournalFirst American CoreLogic reports 20% of borrowers upside-down

March 4, 2009

By staff

Despite the dismal performance of California home values, the state’s average loan-to-value was just 70 percent in a new report that indicated one-in-five U.S. borrowers had negative equity. The average LTV was lowest in New York and highest in Nevada — where more than half of borrowers have negative equity.A report today from First American CoreLogic indicated that 8,311,496 U.S. mortgages had a loan-to-value above 100 percent at the end of last year. The volume of loans that were underwater accounted for 20 percent of all U.S. mortgaged properties.

Three months earlier, 7.6 million borrowers had LTVs higher than 100 percent. That worked out to 18 percent of all financed properties.

The findings were based on data from 41,958,989 mortgaged homes valued between $70,000 and $1,250,000. First American said its database accounted for 85 percent of all U.S. mortgages.

The average LTV on U.S. mortgages was 67 percent.

Among the new borrowers to slide into a negative equity position during the fourth quarter were around 129,000 Californians. Approximately 30 percent of the state’s borrowers — or 1,901,066 mortgages — had LTVs above 100 percent at the end of December. Still, the average LTV in the Golden State was just 70 percent.

Approximately 48,000 borrowers became upside-down in Texas — where around 497,361 loans exceeded 100 percent LTV. The average LTV for Texas borrowers was 74 percent.

Nevada had 45,000 new borrowers slip into a negative equity positions. More than half of the state’s borrowers — 335,340 — were underwater at the end of last year. The average LTV on financed properties in Nevada was 97 percent — higher than any other state.

In Michigan, 40 percent of borrowers were underwater, while the average LTV was 86 percent. The negative-equity share was close to one-third in Arizona, and the average LTV was 77 percent.

New negative equity holders in Florida totaled 42,000, and the share of borrowers with LTVs higher than 100 percent was 30 percent — bringing to 1,284,679 million the number of negative-equity loans. Florida’s average LTV was 75 percent.

The number of underwater borrowers in Virginia also jumped 42,000, and the average LTV was 68 percent.

The average LTV was lowest in New York — at only 48 percent. Just 5 percent of New Yorkers were underwater.

First American said another 2.2 million U.S. borrowers will likely be underwater soon.

The aggregate value of U.S. residential properties was $19.1 trillion as of Dec. 31, 2008, falling from $21.5 trillion a year earlier. Nearly half of 2008’s decline occurred in California — where values plummeted by $1.2 trillion.

The report indicated that more than 2.2 million mortgages had LTVs higher than 125 percent. More than half of these “severe negative equity position” loans were secured by properties either in California or Florida.

First American forecasted that, going forward, the states which will see the biggest increases in negative equity share will likely be those where deep declines have not yet been experienced.

“The reason: the boom/bust states already have very high negative equity shares and incremental declines in home prices will result in smaller negative equity share increases relative to other states given the same decline in prices,” the report said.

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