Tag Archives: Negative Equity

Rep. John Campbell (R-California) introduced to Congress a piece of legislation designed to keep local governments from using eminent domain to seize homes with underwater mortgages. Titled ""The Defending American Taxpayers from Abusive Government Takings Act,"" the bill would prohibit Fannie Mae, Freddie Mac, FHA, and the Veterans Administration from purchasing or guaranteeing loans originating in counties where a municipality has seized a mortgage loan through eminent domain in the last decade.

About 600,000 borrowers rose above negative equity in the second quarter of 2012, CoreLogic reported Wednesday. 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. Even though negative equity is said to be driving factor for default, 84.9 percent of underwater borrowers managed to stay current on their payments.

Lawmakers introduced a bill on Monday with plans to once more revamp the Home Affordable Refinance Program for current borrowers with eligible loans with Fannie Mae and Freddie Mac. Sens. Barbara Boxer and Robert Menendez, among others, drafted the Responsible Homeowner Refinancing Act to increase lender competition, open up refinance opportunities to all current borrowers with government-backed mortgages, and strike through appraisal costs and upfront fees on home loans.

Eighteen percent of current loans remain underwater, according to LPS' July Mortgage Monitor report. In states where the percentage of current loans sitting underwater is extremely high, the share of new problem loans was also higher. For example, the state with the highest percentage of new problem loans was Nevada, where 54.7 percent of current loans are underwater, followed by Florida (33.1 percent), Arizona (28.4 percent), and Georgia (42.8 percent).

With prices gaining in San Bernardino County, Clear Capital found that the solution to the area's problem of negative equity may be solved with time. San Bernardino County has become the center of debate following the creation of a Joint Powers Authority to explore a controversial use of eminent domain. However, with prices in the area rising, the county may not need a drastic rescue plan.

The share of homeowners with underwater mortgages continued its decline in the second quarter, according to the Zillow Negative Equity Report. About 15.3 million homeowners with a mortgage were underwater, or 30.9 percent, a drop from 15.7 million or 31.4 percent. The report also revealed that negative equity more often affects younger age groups, with nearly half (48 percent) of borrowers under age 40 with an underwater mortgage.

Oh behalf of the Securities Industry and Financial Markets Association (SIFMA), managing director Tim Cameron prepared remarks for a meeting in San Bernardino County to once again, express opposition towards the area's proposed use of eminent domain. In his remarks, Cameron stated, ""we believe that the use of eminent domain would significantly harm mortgage finance markets, reduce access to credit for borrowers, and negatively impact average investors' portfolios."" San Bernardino County and the cities of Fontana and Ontario created a Joint Powers Authority to explore the use of eminent domain to seize underwater mortgages at fair market value.

Servicers have three years to provide relief to homeowners as outlined in the $25 billion national mortgage servicing settlement. To raise awareness and alert homeowners of the help that is available, HUD Secretary Shaun Donovan and Iowa Attorney General Tom Miller announced during a conference call a new settlement PSA and online resources through the HUD website.

In hard-hit state Nevada, more than 60 percent of homeowners are underwater, and about one in 16 properties received a foreclosure notice in 2011, according to a 2012 Face of Foreclosure study released by the Nevada Association of REALTORS (NVAR). With negative equity and foreclosures seeming so commonplace in the state, the stigma of strategic default appears to be fading. ""This year's report shows it's more socially acceptable to strategically default on your mortgage,"" said NVAR President Blane Johnson. When surveyed on the topic, 51 percent of those who were foreclosed on said there is nothing wrong with strategic default as a financial decision while 36 percent said homeowners should not choose to strategically default.

Sen. Jeff Merkley(D-Oregon) announced a plan Wednesday to allow underwater homeowners to refinance at lower interest rates through the creation of a Rebuilding American Homeownership Trust. His plans call for a one-time trust he says is similar to the Homeownership Loan Corporation created during the Great Depression. As banks refinance underwater homeowners, the trust would purchase the loans from the banks. Meanwhile, the trust would receive funding from bond sales.