Thread: One in five US homeowners with mortgages underwater

One in five US homeowners with mortgages underwater

Fri Oct 31, 2008 1:12pm EDT

NEW YORK, Oct 31 (Reuters) - Nearly one in five U.S. mortgage borrowers owe more to lenders than their homes are worth, and the rate may soon approach one in four as housing prices fall and the economy weakens, a report on Friday shows.

About 7.63 million properties, or 18 percent, had negative equity in September, and another 2.1 million will follow if home prices fall another 5 percent, according to a report by First American CoreLogic.

The data, covering 43 states and Washington, D.C., includes borrowers nationwide, even those who took out mortgages before housing prices began to soar early this decade.

Seven hard-hit states -- Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio -- had 64 percent of all "underwater" borrowers, but just 41 percent of U.S. mortgages.

"This is very much a regional problem, and people tend to forget that," said David Wyss, chief economist at Standard & Poor's, who expects home prices nationwide to fall another 10 percent before bottoming late next year.

"Most of the country is not in bad shape," he continued. "Things seem to be stabilizing in Michigan, but the big bubble states -- Florida, California, Arizona and Nevada -- are still very overpriced."

About 68 percent of U.S. adults own their own homes, and about two-thirds of them have mortgages.

JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), one of the biggest mortgage lenders, on Friday offered to modify $70 billion of mortgages to keep a potential 400,000 homeowners out of foreclosure. Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), which bought Countrywide Financial Corp in July, also has a large loan modification program.

HOME PRICES, ECONOMY UNDER PRESSURE

U.S. home prices fell a record 16.6 percent in August from a year earlier, with declines in all 20 major metropolitan areas measured by the S&P/Case-Shiller Home Price Indices.

Foreclosure filings rose 71 percent in the third quarter to a record 765,558, according to RealtyTrac.

Meanwhile, the Commerce Department said gross domestic product fell at a 0.3 percent rate in the third quarter. Some experts expect the worst U.S. recession since the early 1980s.

Yet despite a series of expensive government programs to spur lending, mortgage rates are rising, making it tougher to borrow or refinance. The rate on a 30-year fixed-rate mortgage jumped this week to 6.46 percent from 6.04 percent a week earlier, Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) said.

Meanwhile, borrowing costs on hundreds of thousands of adjustable-rate mortgages are expected to reset higher in the coming months. The problem may be particularly serious for borrowers with rates tied to the London Interbank Offered Rate, or Libor, which is abnormally high relative to benchmark U.S. rates.

Last week, Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) said borrowers with its "Pick-a-Pay" ARMs and living in or near Stockton and Merced, California, owed at least 55 percent more on their mortgages, on average, than their homes were worth. Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) is buying Wachovia.

http://www.reuters.com/article/marketsN ... 6420081031? rpc=44

Last week, Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) said borrowers with its "Pick-a-Pay" ARMs and living in or near Stockton and Merced, California, owed at least 55 percent more on their mortgages, on average, than their homes were worth.

Stockton and Merced are heavily invaded, so of course there will be lots of "lier loans" given to illegals in these cities.

There are plenty of Americans that bought homes, expecting the market to continue going up without end. Then they used the homes' equity as cash machines to satisfy the ever important purchases of the things so vital to life, such as high tech TVs, SUVs and Hummers, boats and new wardrobes.
I know of one couple, he has cancer and cannot work and she is a waitress and bartender at a restaurant. They took out a home equity loan just to keep up with the medical bills, but now their mortgage payments are adding up to more than $3,000 a month, including taxes and insurance. They are walking away.
While the purchase of their home was way before the liar loans started, the home equity loan and their credit cards are maxxed with 18-22 percent interest rates on unpaid balances.
This couple are the ones that need a bailout, not Goldman Sachs.

They just had an article that said 9,000 were forclosed in our immediate area.....most were just abandoned and they left alot of their personal belongings behind and no forwarding addresses. Plus alot of builders have just left with half built homes.......no forwarding addresses either.

All the areas they mentioned were majority hispanic areas.