Almost 50% of Florida Mortgage Borrowers Are Under Water

[FayeforCure]

NOVEMBER 24, 2009

Nationally, One in Four Borrowers Is Underwater

By RUTH SIMON and JAMES R. HAGERTY

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

Underwater Mortgages
State-by-state details on underwater home loans


More interactive graphics and photos Developments: So You're Underwater, What's Next? These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.

Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.

Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau.

But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default.

AM Report: Millions Underwater in Mortgage Crisis
10:06
Even home buyers who thought they were getting a bargain are now finding themselves underwater. The News Hub panel discusses a mortgage crisis that has left millions owing more than their homes are worth.
Journal Community
Discuss: How much of your home's value do you owe on your mortgage? Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.

Just months after showing signs of leveling off, the housing market has thrown off conflicting signals in recent weeks. Jittery home builders and bad weather led to a 10.6% drop in new home starts in October, and applications for home-purchase mortgages have dropped sharply in recent weeks.

These same falling prices have boosted home sales from the depressed levels of last year. The National Association of Realtors reported Monday that sales of previously occupied homes in October jumped 10.1% from September to a seasonally adjusted annual rate of 6.1 million, the highest since February 2007.

The bump in sales was ahead of forecasts, spurred by falling prices, low mortgage rates and a federal tax credits for buyers. Congress recently expanded and extended the tax credits.

The latest First American data aren't comparable to previous estimates because the company revised its methodology. First American now accounts for payments made by homeowners that reduce principal, and it no longer assumes that home-equity lines of credit have been completely drawn down.

The changes reduced the total number of borrowers under water -- although both old and new methodology show increases from the previous quarter. Using the old methodology, the portion of underwater borrowers would have increased to 33.8% in the third quarter.

View Full Image

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

More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.

Journal Communitydiscuss“ If you can't afford it, you shouldn't have bought it, you don't deserve it, walk away. And greedy bank that holds it can take the hit. They may not have been the one that sold it to you but there isn't a financial institution that is innocent in this mess. ”
â€" Tim Caputo Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value.

Andrew Lunsford put 20% down when he bought his home in Las Vegas for $530,000 in 2004. Now, he said, his home was worth less than $300,000.

"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest."

Borrowers with negative equity are more likely to default if they live in a state where the bank can't pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond.

But borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced, said Sanjiv Das, head of Citigroup's mortgage unit. "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction."

Mortgage companies have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or redefaulting because they believed the bank would reduce their principal," Mr. Das said.

Related Article
Distressed Homeowners Ponder Whether to Stay or Go Many borrowers are so deeply under water that they can't take advantage of lower rates and refinance their mortgage. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."

Realtors reported that home sales in October were up 24% from a year earlier. The number of homes listed for sale nationwide was 3.57 million at the end of October, down 3.7% from a month earlier, the trade group said. But that inventory could rebound next year as banks acquire more homes through foreclosure.

About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.

A recovery could pay off for the roughly 30% of underwater borrowers who owe 110% or less of their home's value and are able to endure the slump. "Most people prefer to stay in their home" even if the value of their property has declined, said John Burns, a real-estate consultant based in Irvine, Calif.

â€"Nick Timiraos contributed to this article.
Write to Ruth Simon at ruth.simon@wsj.com and James R. Hagerty at bob.hagerty@wsj.com

http://online.wsj.com/article/SB125903489722661849.html

See map by State: Florida's numbers are far worse than the Nation's 1 in 4.

In Florida it's almost 1 in 2 mortgages that are underwater!!!

Lunican, can you post the interactive map showing underwater mortgages by state?

http://s.wsj.net/public/resources/documents/info-NEGATIVE_EQUITY_0911.html

Thanks,

Faye

[Overstreet]

I have one of those upside down houses. The mortagage company and the insurance company have fits about how much the place is worth, or rather not worth. Bad timing and unfortunate job movement. It is not a fun thing to have.

[mtraininjax]

Its a cycle, just like with good times you have bad times, we will get out of it some time soon. It can't always be bad news.

[FayeforCure]

I have one of those upside down houses. The mortagage company and the insurance company have fits about how much the place is worth, or rather not worth. Bad timing and unfortunate job movement. It is not a fun thing to have.

Overstreet, I'm sorry to hear that. It can happen to anyone. There is one positive about knowing how widespread it is: "There is comfort in numbers" as they say.

All indications are that this will be a pro-longed cycle, much as the "Lost Decade" in Japan's recession of the 90's, since the job market will take much longer to recpver than some of the other economic indicators.

Jobs has always been a "lagging indicator," but if we don't shift to a more innovative economy based on green collar jobs rather than bailing out the white collar jobs of the financial and insurance industry that created our economic bubble, we will only prolong our recession unnecessarily.

[FayeforCure]

Take action TODAY!

And here’s the real truth of the matter: If judges are allowed to modify mortgages in bankruptcy, they’d likely never be given the chance… the banks would modify the loans themselves, again… like they’re supposed to, remember.

H.R. 4173, the Wall Street Reform and Consumer Protection Act will be considered by the full House of Representatives beginning this Wednesday, December 9th.  You can read the bill here:

The Wall Street Reform and Consumer Protection Act â€" H.R. 4173

And you can read my much more in-depth, yet not boring in the least feature story, “A Time for Good Judgment â€" The jury is in and we need banks to modify the way banks behave,” here.

We need this amendment to pass as it’s written.  But don’t get lulled into a false sense of security… it’s the banks we’re up against and they’ve managed to defeat what this amendment would allow twice before.  We need to let our voices be heard LOUD & CLEAR.

You can help by taking action at three different levels:

Call Your Representative â€" Calling your elected representatives is effective, because you can count on the fact that you won’t be the only one placing such a call.  Next year is an election year and the entire House of Representatives is up for reelection.  When your representative hears from hundreds or thousands of his or her constituents, it makes a real difference because he or she knows that for every call received, there are dozens of others in your district that feel the same way you do, but didn’t take the time to place a call.
Ask to speak with the staff person who is handling H.R. 4173, the Wall Street Reform and Consumer Protection Act.  Identify yourself as being a constituent.

Email Your Representative â€" Writing to your elected representatives has even more impact than calling does.  That’s because it requires a bit more effort, and therefore your representative knows that there are hundreds of others in your district that feel the same way you do, but didn’t take the time to write and send an email.

Drop By and Say Hello â€" Writing a letter, printing it out, placing it in an envelope and delivering it to your congressional representative’s district office has even more impact than emailing, for the same reason that emailing has more impact than calling.  You don’t have to worry about your representative being there… staff members will let him or her know when a group of people all stop by to drop off a letter related to the same issue, because it’s highly likely that thousands of people in the district feel the same way.

http://mandelman.ml-implode.com/2009/12/breaking-news-amendment-allowing-judges-to-modify-mortgages-to-be-included-in-h-r-4173-wall-street-reform-and-consumer-protection-act/

A SAMPLE LETTER TO YOUR ELECTED REPRESENTATIVE:


I am writing to urge Rep. __________ to support the amendment to H.R. 4173 being offered by Reps. Conyers, Turner, Lofgren, Marshall and others that will help stabilize the housing market by helping families avoid foreclosure.

The foreclosure crisis continues to worsen and is preventing the economy from beginning its recovery. In 2009 alone there have been more than four million foreclosures, and it has been forecasted that unless something is done, there will be 14 million more over the next few years.

The Obama Administration’s Making Home Affordable plan has failed to-date because it provides a carrot, but no stick.  The stick was always intended to be judicial loan modifications.

Obviously, the banks and servicers are not going to modify loans voluntarily.   We need judges to be able to modify the mortgages on primary residences for homeowners in bankruptcy.

If you voted yes on HR 1106 this past spring, this new amendment is identical to H.R. 1106.  If you voted no on HR 1106: Please consider that in the intervening months, the foreclosure crisis has gotten much worse.  If our economy is to recover, we need the housing market to stabilize before any recovery can take hold.

Thank you.

Sincerely,

John and Joan Q. Public

Whatever you do… DO IT TODAY… like now would be perfect.  Don’t put it off and let it go.  Our country’s economy and millions of homeowners are counting on you.  TOMORROW AT THE LATEST…

CONGRESS WILL BE DEBATING THIS ON THURSDAY OF THIS WEEK

[mtraininjax]

 The bailouts of banks were done for wall street, and nearly every legislator voted for it. What makes you think they will stick their neck out for reform now?