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Econwatch
November 24, 2009 9:49 AM

1 in 4 Mortgage Borrowers Is Under Water

By
David Morgan
Topics
Real Estate
(CBS/AP)
Nearly a quarter of U.S. mortgage holders owe more on their loans than their houses are worth, according to a report today in the Wall Street Journal.

Data from First American CoreLogic, a Santa Ana, Calif.-based real-estate information company, shows that in the third quarter of 2009 almost 10.7 million households had negative equity in their homes.

Despite good news on the house resales front — it was reported Monday that , climbing to the highest level in 2? years, due in part to a first-time buyers' tax credit — the Journal's Ruth Simon and James R. Hagerty write that this swelling of "underwater mortgages" threatens the prospects of a sustained housing recovery.

These properties are more likely to fall into foreclosure, ultimately being dumped by banks and mortgage holders onto an already-saturated market, depressing falling house prices even further.

The First American report said that more than 520,000 of borrowers whose mortgages are at least 20% higher than their home's value have received a default notice.

Negative equity "is an outstanding risk hanging over the mortgage market," Mark Fleming, chief economist of First American Core Logic, told the Journal. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job."

According to the analysis, homeowners in Nevada, Arizona, Florida and California are more likely to be deeply underwater. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.

For more read the complete article at wsj.com, and check out the Journal's Interactive Map: State-by-State Data on "Underwater Borrowers."

  • David Morgan

    David Morgan is a senior editor at CBSNews.com and cbssundaymorning.com.

Add a Comment See all 50 Comments
by pohd1 November 25, 2009 2:13 AM EST
Administration stated things are on right track. Wall Street lap dogs said the same thing. We were told that the housing mortgage situation was turning around. I guess they did not say the turn was for the worst. Great journalism just like no story about the climate change hacked emails. If these were hacked emails about Bush White House about lying about Iraq you would be having several stories each day about it. I guess you are waiting marching orders from Gore and attack the hackers aka whistle blowers.
Reply to this comment
by krzeaz November 24, 2009 10:07 PM EST
Great job, Barney Frank.
Reply to this comment
by tmn November 24, 2009 10:42 PM EST
If you ever met Barney, you'd actually like him quite a bit.
by Mosihasteen November 25, 2009 2:51 AM EST
Maybe if I was gay.
by krzeaz November 24, 2009 10:03 PM EST
Great idea, giving loans to non-loan worthy people! This is the result.
Reply to this comment
by the74blaster November 24, 2009 11:36 PM EST
I disagree.

The banks made a business decision to give these people the loans and lost. They should be allowed to go under for making bad business decisions.

Th government did not hold a gun to the heads of those writing mortgages. It was a bad business decision on their part and our governmnt bailed them out.

As far as non-loan worthy people go, the government sold them out as well. The concept of free trade agreements was only a fabrication made by the highrollers who would benefit by busting the unions and shipping the high paying manufacturing jobs off shore to line their pockets with more money.
by daniel_bingamon November 24, 2009 6:51 PM EST
Some us buy older homes and have paid smaller mortgages to play it safe. Are we going to set a new standard that those who play chance will get bailed out like the banks?

This is no different than buying a car. When you buy a car it drops in value immediately when you drive off the lot. If you can't make payments it gets repossesed. Because it drops in value, there are times that the car is worth less than what you own on it. This is nothing new.

The banks really made out like bandits, they got the bail, they acquired a huge wealth of properties which were conveniently called "Toxic assets". Those acuisitions they're setting on are potential gold mines when the economy eventually bounces back. They got the cake and to eat it too. Not many talk about that - many bailed out loans could have been forgiven - the extra money on hand could have boosted the economy on homes with the burden removed.

I think whole thing was a jump before they think about it reaction.
Reply to this comment
by bann65 November 24, 2009 6:49 PM EST
IS THIS MORE OF CRAZY BARNEY FRANK'S DAMAGE? TELL THESE HOMEOWNERS TO GET THEIR YOU KNOW WHAT OUT OF WATER! NO MORE HELPING THESE IRRESPONSIBLE DUMBER THAN DUMB FRIGGIN PEOPLE.
Reply to this comment
by underwaterarizona November 24, 2009 6:18 PM EST
People who are underwater on their mortgage should read an article by an Arizona law Professor titled, Underwater and Not Walking Away, in which he argues that homeowners are shamed into making the bad financial decision to keep paying their mortgage even when the are seriously underwater. The article is downloadable at for free http://ssrn.com/abstract=1494467. As the professor argues, don?t let the government or the banks shame or scare you into holding onto a bad investment. And don?t believe the wishful thinking that if you just hold on, prices will rebound soon. It's not going to happen for decades in the worst hit markets. In the meantime, you are throwing away your money, unless your mortgage payment is less than what you can rent for. Read Prof. White?s article, do some research, and make the best financial decision for you and your family.
Reply to this comment
by gboyd41 November 25, 2009 10:51 PM EST
Don't worry, Obama will ride in to save the day-Right!
by rightbehind November 24, 2009 5:08 PM EST
I say bypass the banks and make direct government low interest loans. The interest collected can be used to pay off the national debt. Too many bank stockholders on the backs of the middle class.
Reply to this comment
by rightbehind November 24, 2009 5:00 PM EST
If we put republicans back in office maybe our accounts will fill back up with speculation. Just got to get used to those credit default swaps, hedge funds, and derivatives. Tax breaks for the wealthy so they'll hire more people than they need!

18 more republicans senate seats on the ballot in 2010. Let's put them on the unemployment line along with some republicrats.
Reply to this comment
by AOCGUY November 24, 2009 7:01 PM EST
speculation is what got us here just like in the 20s. STOP the greed, buy only what you can afford, a home is where you live not a property to flip and make a quick buck. Responsibility is the only solution.
by rightbehind November 24, 2009 4:52 PM EST
Now, Now, there are stockholders to feed and CEO to pay. Let's not forget about those bonuses. Feeling free? That's better! No cash in your wallet? Don't worry, you won't need it much longer. We're handing out corporate kingdom debit cards. Soon there be no more need for cash. How's that for liberty and freedom. You are a resource. OBTW in order to increase stockholder dividends we may moving your job to a third world country. Cause and effect

18 more republican senate seats on the ballot in 2010. Lets send them all packing including the republicrats.
Reply to this comment
by Stevenapoli7 November 24, 2009 4:27 PM EST
Your house is not an asset; it is a liability. Hopefully a lesson to be remembered.
Reply to this comment
by rightbehind November 24, 2009 4:55 PM EST
What if you don't have one and your standing in the cold.
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