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One in five property owners has an underwater mortgage

An estimated 22.8 percent of houses, more than 11 million houses, are underwater. That means almost a quarter of homeowners owe the bank more than their property is worth on the industry. Article resource: More than one-fifth of homeowners have underwater mortgages

Investment drops

Part of the idea behind buying a home is that it’s an investment. Returns on real estate aren’t that good in the long run, but it’s the most common investment vehicle.

A lot of property owners are facing the problem where they owe more on their home than the value is anymore due to the housing collapse. It brought on the worth of houses to decrease drastically. This is called being “underwater” on your home loan and is also called negative equity.

Many underwater

There were 10.9 million property owners underwater on their home loan in the second quarter of 2011, according to the New York Times. CoreLogic estimates that by the third quarter, this number decreased to 10.7 million, although foreclosures are anticipated to be the reason why.

That number then increased in the fourth quarter of 2011 though, CoreLogic showed according to Time magazine. It increases to 11.1 million houses underwater, which was a 3.7 percent increase. That means about 1 in 5 people, or 22.8 percent of the population, has an underwater mortgage.

The most troubles were shown in states hit hardest by the real estate downturn. The New York Times reports that without the worst five states, the average rate was 17.6 percent in Nov. Nevada has a 61 percent rate of underwater properties. Arizona has a 48 percent rate and Florida has a 41 percent rate. The worst five states on the list conclude with California and Georgia.

Federal government getting in-volved

The government has been trying to help with underwater mortgages for some time, although it has not really helped. The failure of the Home Affordable Refinancing Program shows this.

[Rates are so good on most installment loans that you don't need to refinance those]

According to Reuters, the Federal Housing Finance Bureau expanded a similar program in October, 2011, called the Home Affordable Refinance Program. Previously, only property owners whose houses were worth less than 125 percent of the market value were eligible for the program, but the cap was removed.

Up to 1 million homeowners might be able to get help through the program that demands property owners to be current on payments, hold less than 20 percent of equity in the home and to be insured by Fannie Mae or Freddie Mac. Only 895,000 people have been able to get HARP financing in spite of the belief that it was expected to help up to 5 million people when it was started in 2009.

Sources

Time

New York Times

USA Today

Reuters: http://www.reuters.com/article/2011/10/25/us-usa-housing-idUSTRE79K6JY20111025

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