Underwater Mortgages Viewed in Half-Full/Half-Empty Glass

Underwater Mortgages Viewed in Half-Full/Half-Empty Glass

April 4, 2016
More than 5.2 million residential properties were seriously underwater during the first quarter of this year

There is good news and bad news on the underwater mortgage front, according to new data from the Data & Analytics division of Black Knight Financial Services (BKFS). The good news: The underwater borrower population fell by 31 percent in 2015 to 6.5 percent of all homeowners with a mortgage. The bad news: There were still 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first and second lien housing debt.

Nevada has the highest percentage of borrowers with underwater mortgages—14 percent—while Florida leads the country in volume with just under 500,000 underwater borrowers. Only one state saw an increase in its underwater population last year: Missouri, which held that unfortunate distinction due to falling home prices.

Black Knight Data & Analytics Senior Vice President Ben Graboske noted that while the number of homeowners with underwater mortgages is on the decline, the problem is still significant for many local housing markets.

“When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets,” said Graboske. “That’s the highest share on record. In fact, while the national negative equity rate is now 6.5 percent, for homes in the lowest price tier, it’s over 16 percent. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels—roughly two-and-a-half years longer than homes in the top 20 percent.”