Research firm First American CoreLogic says 23% of Americans with mortgages owe more than their home is worth. That's 10.7 million U.S. mortgages, or almost 1 in 4, and another 2.3 million homeowners are within 5% of negative territory. Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American. Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau. The majority of underwater mortgages are heavily concentrated in five states that have particularly suffered from the housing bust: Nevada, at 65%; Arizona, at 48%; Florida, at 45%; Michigan, at 37%; and California, at 35%. Negative equity, also called an "underwater" or "upside down" mortgage, has become more common as home values plumme
t, and the numbers are closely watched because borrowers who are underwater are more likely to be foreclosed.
These five states have been hit especially hard because of a high rate of prime loans that went bad. Some of those loans were option-adjustable rate mortgages, and when the accumulated debt reaches a certain point -- usually 10% to 25% more than the original principal -- the option-ARMs loans are recast into fixed-rate mortgages. When that happens, many borrowers cannot afford the new payments. But mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.
Subscribe