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As home prices increase, more borrowers are rising out of negative equity.
Recent data from ""CoreLogic"":http://www.corelogic.com/ revealed about 100,000 borrowers moved out of negative equity during the third quarter of 2012, bringing the total number of homeowners who transitioned from negative to positive territory in 2012 to 1.4 million so far.
[IMAGE]In the third quarter, about 22 percent of residential properties with a mortgage were considered to be underwater, which translates into 10.7 million mortgages, down from 10.8 million properties in the second quarter.
""Through the third quarter, the number of underwater borrowers declined significantly,"" said Mark Fleming, chief economist for CoreLogic. ""The substantive gain in house prices made in 2012, partly due to tight inventory caused by negative equity's lock-out effect, has paradoxically alleviated some of the pain.""
According to CoreLogic, as of the third quarter, about 1.8 million borrowers were underwater by 5 percent, which means they, too, could rise out of negative equity soon if home prices continue to rise.
[COLUMN_BREAK]However, about 2.3 million borrowers had less than 5 percent of equity in their homes and are in a state of near-negative equity.
When combining underwater borrowers and near-negative equity borrowers, CoreLogic found the groups together represent about 26.8 percent of all residential properties with a mortgage.
The total value of homes in negative equity also declined. In dollar terms, negative equity was reduced by $31 billion, falling to $658 billion in the third quarter from $689 billion in the previous quarter.
According to CoreLogic, the ""decrease was driven in large part by an improvement in house price levels.""
""As we look ahead into 2013, we expect to continue to see more borrowers' escape the negative equity trap and that will be a strong positive for the housing market specifically and the broader economy generally,"" said Anand Nallathambi, president and CEO of CoreLogic.
Among the states, Nevada took the lead for having the highest percentage of borrowers who are underwater. CoreLogic reported 56.9 percent of properties with a mortgage in Nevada are in negative equity. The state was followed by Florida (42.1 percent), Arizona (38.6 percent), Georgia (35.6 percent) and Michigan (32 percent).
Together, the top five states account for 34 percent of all negative equity in the country.
CoreLogic also noted that at the end of the third quarter, about 17.1 million borrowers had loan-to-value ratios (LTVs) between 80 and 125 percent, which was the required range under previous Home Affordable Refinance Program (HARP) guidelines. When the 125 percent LTV cap was removed in March 2012 with the introduction of HARP 2.0, another 4.6 million borrowers were able to look into the program.
