Tag Archives: Underwater Mortgages

Maryland-headquartered technology development firm, Indisoft has announced the appointment of Frank Pallotta to its advisory board. An established leader in the mortgage industry, Pallotta also brings a wealth of experience in the capital markets. “We are very excited to add ...

Though the share of underwater borrowers has fallen for 20 straight quarters, data released today begs an interesting question. Could the days of decline be coming to a close?

Overall, the number of underwater borrowers is down in the U.S., but a report released today reveals something interesting: those remaining underwater mortgages are largely concentrated in certain price tiers and geographic areas. What three cities claim the most?

The number of seriously underwater properties is on the decline, according to a recent home equity report. Approximately 5.5 million U.S. homes were seriously underwater for the quarter—a drop from last year’s 6.7 million. As a percentage of all mortgages, seriously underwater loans also dropped, accounting for 9.7 percent of all loans versus the 12 percent of Q1 2016.

The National Housing Survey from Fannie Mae contains data that suggests that homeowners who are underestimating how much equity they have in their homes may also be underestimating in other areas, such as how large of a downpayment they could make with that equity; their chances of qualifying for a mortgage, assuming they need a large downpayment; and their opportunities for selling their house and buying another one.

About 9.7 million residential properties out of the 50 million homes nationwide with a mortgage (19.4 percent) have less than 20 percent equity, which is commonly referred to as being "under-equitied." About 2.7 percent of homes (1.3 million) have less than 5 percent equity, which is commonly referred to as having "near-negative equity."

Foreclosures, short sales, and rapidly rising home values saved 7.9 million of these homeowners from the pool of negative equity by the end of the first quarter. Those that remain underwater are expected to be the most severe cases to repair.

In the opening arguments on Tuesday morning for two cases in the U.S. Supreme Court to determine the legality of extinguishing, or "stripping off" an underwater second mortgage as unsecured debt for a debtor in bankruptcy, an attorney representing Bank of America contended that the high court should uphold a 1992 decision that outlawed stripping off, while attorneys representing the debtors argued that the decision is irrelevant to these two cases.

Yale Law School's Mortgage Foreclosure Litigation Clinic and the Connecticut Fair Housing Center (CFHC) have filed an Amicus Brief with the U.S. Supreme Court in support of the respondents in a case to decide whether underwater homeowners in Chapter 7 bankruptcy can legally eliminate the liability on second mortgages, a process known as "stripping off," according to an announcement on Yale Law School's website.

Despite the year-over-year decline in the percentage of underwater residential properties, negative equity remains a serious issue, according to Anand Nallathambi, president and CEO of CoreLogic. For the full year of 2014, 1.2 million borrowers regained equity – but nearly five and a half million properties remained in negative equity as of the end of the year after approximately 172,000 homes slipped into negative equity from the third quarter to the fourth quarter in 2014.