One in five properties is underwater

An estimated 22.8 percent of properties, over 11 million homes, are underwater. That means almost one fourth of homeowners owe the bank over their house is worth on the market. Article source: More than one-fifth of homeowners have underwater mortgages

Defeating the purpose

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

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

Issue for one in five

In the second quarter of 2011, according to the New York Times, industry analysis firm CoreLogic believed that 10.9 million homeowners owed more on the remainder of their mortgages than their houses were worth on the industry. By the third quarter, it had receded slightly to 10.7 million, though the reduction was largely due to foreclosures.

CoreLogic has just released its analysis of the fourth quarter of calendar 2011, according to Time magazine. CoreLogic found the number of property owners holding negative equity had increased by 3.7 percent, to 11.1 million properties being underwater. That is roughly 22.8 percent of the population, just over one in five individuals.

States hit hardest by the real estate downturn had the highest proportions of underwater homeowners. An estimated 61 percent of properties in Nevada are underwater, along with 48 percent in Arizona and 41 percent in Florida. In November, the average rate discounting the worst five states, which involved Georgia and California, was 17.6 percent, according to the New York Times.

Listening to from government

The government has been attempting 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 Oct, 2011, called the Home Affordable Refinance Program. Previously, only homeowners whose houses were worth less than 125 percent of the industry value were eligible for the program, but the cap was removed.

Eligible property owners, according to USA Today, have to be current on payments, hold 20 percent or less equity in their properties and their loans must be insured or owned by either Fannie Mae or Freddie Mac. It’s expected that the program could secure refinancing for up to 1 million property owners. The program was underutilized prior to October; it had been projected to be able to help up to 5 million individuals when it was launched in 2009 but only 895,000 people had secured refinancing through HARP.



New York Times

USA Today

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

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