Borrowers in Negative Equity Declining as Home Values Gain: Report

About 600,000 borrowers rose above negative equity in the second quarter of 2012, ""CoreLogic"":http://www.corelogic.com/ reported Wednesday.

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According to the company's analysis, 10.8 million, or 22.3 percent, of residential properties with a mortgage remained underwater for the second quarter of 2012. The second quarter figure is a decrease from the first quarter of this year, when 11.4 million properties, or 23.7 percent, were underwater.

Even though negative equity is said to be a driving factor for default, 84.9 percent of underwater borrowers managed to stay current on their payments.

""The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,"" said Mark Fleming, chief economist for CoreLogic. ""Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.""

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While 600,000 homes moved into positive territory, 2.3 million borrowers were in a state of near-negative equity since they had less than 5 percent equity in their home. For these borrowers, the scale can tip either way, depending on the direction of home prices.

Anand Nallathambi, president and CEO of CoreLogic, said the expectation is for home prices to continue to trend up in August.

""Were this trend to be sustained we could see significant reductions in the number of borrowers in negative equity by next year,"" added Nallathambi.

When combining negative and near-negative equity mortgages, CoreLogic found that 27 percent of all residential properties would be in one of the categories.

In dollar terms, the amount of negative equity decreased quarterly to $689 billion to $691 billion.

The states with the highest percentage of underwater mortgages were Nevada (59 percent), Florida (43 percent), Arizona (40 percent), Georgia (36 percent), and Michigan (33 percent).

Of the 10.8 million underwater mortgages, CoreLogic found that 6.6 million are without a home equity loan and the average amount in which they are underwater is $51,000. About 4.2 million underwater borrowers have first and second liens and on average, they are underwater by $84,000.

The report also stated that homes valued at less than $200,000 had a negative equity share of 32 percent compared to 17 percent for homes valued more than $200,000.