Mortgage Daily Logo
mortgage news from industry experts

Wave of Underwater Borrowers Move Into the Black

More than 700,000 mortgages moved from a negative-equity position to less than 100 percent loan-to-value during the latest quarter as the outlook for the real estate market improved. More than a million more are poised to join them if market momentum continues.

U.S. residential properties that had a mortgage balance in excess of the value accounted for 23.7 percent of all financed homes as of March 31. That worked out to 11.4 million properties. Just 4.5 million of the upside-down mortgages had an accompanying home-equity loan.

The share fell from a revised 25.2 percent three months earlier, when a revised 12.1 million residences had an LTV ratio in excess of 100 percent.

CoreLogic originally reported that the fourth-quarter 2011 rate was 22.8 percent and that the number of upside-down properties was 11.1 million.

The revision reflected the introduction of the “GeoAVM Core Cascade,” which “selects the most appropriate AVM to predict current market value and is calibrated to market sales activity on a quarterly basis.” The Santa Ana, Calif.-based firm claims that the new cascading approach increases valuation accuracy and the precision of negative-equity estimates.

Based on the revised data, the rate of negative equity hasn’t been this low since at least the third-quarter 2009 — the oldest historical data reported.

Negative-equity improved from a revised rate of 24.7 percent for the first quarter of last year. The revised number of upside-down properties for a year earlier was 11.5 million.

An additional 2.3 million borrowers had “near-negative equity” with LTVs that exceeded 95 percent, bringing the total share to 28.5 percent in the most-recent reported period.

As more than 700,000 borrowers regained a positive equity position in the first quarter, negative equity fell to $691 billion from $742 billion in the final quarter of 2011.

The improvement was largely “driven by quickly improving outlooks in some of the hardest hit markets,” CoreLogic Chief Economist Mark Fleming explained in the report.

The number of underwater borrowers could drop by 1.9 million if home prices continue increasing over the next year as that many loans are no more than 5 percent in the red.

When zeroing in on just loans on home valued less than $200,000, the negative-equity share jumped to 31 percent. But the share tumbles to 15.9 percent on properties worth more than $200,000.

Nevada, which had the highest share of negative-equity mortgages, saw its rate fall to 61.2 percent from the fourth quarter’s 64.8 percent. No. 2 Florida improved to 45.1 percent from 47.4 percent, while Arizona fell to 43.4 percent from 50.6 percent.

Next was Georgia, where the share narrowed to 37.2 percent from 40.1 percent, then Michigan, which had 35.6 percent share versus the prior quarter’s 37.9 percent.

CoreLogic’s data, which it says includes 48 million properties accounting for more than 85 percent of all U.S. mortgages, reflected $8.6353 trillion in mortgages outstanding with corresponding properties values collectively at $12.2449 trillion.

Fannie Mae estimates that total outstanding U.S. mortgages were at $10.140 trillion in the second quarter, including $9.303 trillion in first mortgages.

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION