Underwater Homeowners In St Louis Drops To Lowest Rate In Two Years

During the fourth quarter of 2018, 14.2% of the homeowners in St Louis with a mortgage, were underwater on their mortgage, meaning they were in a negative-equity postion, according to data just released by ATTOM Data Research.  As the table below shows, this is the lowest rate since the 4th quarter of 2017 when the St Louis undertwater homeowner rate was at 13.8%.  On a national level, just 8.8% of homeowners with a mortgage are underwater which puts the St Louis rate at 161.5% of the US rate.

St Louis Underwater (Negative-Equity) Homeowners – 2013-2018

St Louis Underwater (Negative-Equity) Homeowners - 2013-2018

Number of St Louis Homeowners with Negative Equity Drops Almost 9 Percent in Past Year

dennis-norman-st-louis-realtor-

As of the end of the second quarter of this year, there are 90,937 underwater St Louis homeowners, according to a report just released by Corelogic.  This represents a slight increase from the prior quarter when there were 90,196 underwater St Louis homeowners and a decrease of almost 9 percent (8.8 percent) from the 2nd quarter of 2011 when St Louis underwater homeowners numbered almost 100,000 (99,792).  One is said to be “underwater” on their mortgage when they owe more on their mortgage than their home is currently worth, which is also referred to as having “negative equity”.

Playing a large part in this reduction of homeowners with negative equity has been a combination of both an increasing number of foreclosures (which thereby removes the underwater loan from existence) and increasing home prices.  As you can see by the chart I produced below, St Louis home prices have been increasing in the past year.  The current price trend shown on the chart indicates an upward trend that, if continues, will help pull more underwater borrowers back above water. Continue reading “Number of St Louis Homeowners with Negative Equity Drops Almost 9 Percent in Past Year

FHA Offers Alternative For Underwater Homeowners

Dennis Norman

Last week HUD announced changes to FHA home loan programs to provide refinancing options to homeowners who owe more than their home is worth. Under FHA’s new plan, existing underwater homeowners can refinance their existing non-FHA loan into a FHA loan as long as they are current on their loan and their current lender reduces their total mortgage debt by at least 10 percent of the loan amount.

The total mortgage amount for the borrower after refinancing cannot be greater than 115 percent of the current value of the home, bring the loan amount for an underwater borrower closer to the actual value of their home. I don’t believe this program is actually in effect yet, but it should be within the next few months.

Program highlights:

  • Existing loan must not be FHA-insured
  • Esiting lender must agree to writedown the principal loan balance a minimum of 10 percent and the final loan amount cannot exceed 115 percent of the current value of the home (including and second mortgages). The refinanced FHA loan cannot be greater than 97.75 percent of the value of the home.
  • The refinanced FHA loan will be on standard FHA terms
  • Existing lenders can retain second mortgages on the property, but only up to a combined 115 percent of the current value of the home.

Homeowner Eligibility:

  • Homeowners must be current on thier mortgage payments
  • Homeowner must occupy the home as their primary residence
  • Homeowners must qualify for new FHA loan under standard FHA borrower guidelines
  • Homeowners must have a FICO credit score of at least 500

I will write more about this program and give more details as they become available.

Almost one-in-four borrowers underwater on home mortgage

Over Fifteen Percent of Missouri Borrowers are Underwater-Another 5.6 Percent Are Almost Underwater

Dennis Norman

Dennis Norman

According to a report released today by First American CoreLogic more than 11.3 million U.S. mortgages, or 24 percent of all mortgaged properties, are in a negative equity position meaning the borrowers owe more on their mortgage than their home is worth as of December 31, 2009.

There were approximately 600,000 more borrowers underwater on December 31, 2009 than just three months earlier. In addition, there were an additional 2.3 million mortgages approaching negative equity at the end of last year firstamerican corelogic.

Together, negative equity and near-negative equity mortgages account for nearly 29 percent of all residential properties with a mortgage nationwide.

Like foreclosures, borrowers with negative equity are concentrated in five states: Nevada, which had the highest percentage of negative equity with 70 percent of all of the states mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent). Among these five states the average negative equity is 42 percent of the mortgages compared with an average of 15 percent for the remaining 45 states.

Other highlights from the report are:

  • The states with the highest percentage increases in negative equity during 4th quarter 2009 were Nevada, Georgia and Arizona.
  • The rise in negative equity is closely tied to increases in foreclosures and is a major factor in changing the behavior of homeowners. According to the report, once a homeowner has over 25 percent negative equity or the mortgage balance is $70,000 higher than the current property value, homeowners begin to default with the same propensity as investors. In other words, they stop looking at their home from an emotional standpoint and start treating it like a bad investment.
  • The average negative equity in 4th quarter was $70,700, up from $69,700 in 3rd quarter.
  • Of the over 47 million homeowners with a mortgage, the average loan to value ratio (LTV) is 70 percent. More than 23 million, or 49 percent, of all homeowners with a mortgage have at least 25 percent equity in their home, and over 12 million have at least 50 percent equity in their homes.

Even though the housing market is showing signs of stabilizing in many areas, the number of people underwater on their mortgages is something that gives me great concern. As shown in the corelogic report, the average amount of negative equity has now broken the $70,000 threshold where homeowners are more easy to succumb to walking away. As borrowers due this, we will see the mortgage delinquency rates, which are already at record highs, continue at a record pace, and we will see the shocking foreclosure rate continue for some time. This will continue to put downward pressure on the housing market making an actual recovery that much more difficult.

I hate to sound gloom and doom, but I think unless some good things start happening (a whole lot less unemployment for one) this will be reality.

corelogic-underwater-4th-quarter-1

The Cost of Not Walking Away From An Underwater Mortgage

In the ongoing debate about whether one should walk away from an underwater mortgage or not, one University of Arizona professor speaks out strongly in favor of taking a hike. According to Brent T. White, an associate professor of law at the University of Arizona:

A failure to grasp the true economics of the situation is holding back many Americans whose home values have dropped far below the amount they owe and who would be better off renting, Mr. White says. Fear, shame and guilt also are preventing rational decisions, he believes. And, he says, those “emotional constraints” are encouraged by politicians and bankers, who ruthlessly and amorally follow their own economic interests while telling Joe Soggy Homeowner he has a moral duty to pay his debt so long as he possibly can. Continue reading “The Cost of Not Walking Away From An Underwater Mortgage

St. Louis Real Estate News: Over 15 percent of St Louis homeowners with a mortgage are underwater

Dennis Norman
Dennis Norman

According to a report released today by First American CoreLogic nearly 10.7 million U.S. mortgages, or 23 percent of all mortgaged properties, are in a negative equity position meaning the borrowers owe more on their mortgage than their home is worth as of September 30, 2009.  firstamerican corelogic

 

 

Here in St. Louis, as of September 30, 2009, there were 87,557 homeowners in St. Louis that were “underwater” on their mortgage, meaning they owe more than their home is worth.  This works out to 15.14 percent of the homeowners in St. Louis with a mortgage, so about 2/3 of the national rate.

If you read my post about CoreLogics 2nd quarter Continue reading “St. Louis Real Estate News: Over 15 percent of St Louis homeowners with a mortgage are underwater

Why We’re Walking Away

I posted yesterday on the Wall Street Journal article Report Sheds Light on Why Homeowners Walk Away. A couple of commenters on the WSJ article said why they were walking away from their mortgage, and I thought their comments were interesting enough to repeat. The first walker says that as a good borrower he is unable to have his loan modified, the second blames bank policies:

The banks (my lender is CITI) are unwilling to modify mortgages for the people able to pay. I suspect if the people underwater, but with money and good credit – you know, responsible people – were able to secure a more reasonable APR that made their monthly payments less painful, they’d more easily tolerate paying on that over-valued house. Continue reading “Why We’re Walking Away

Almost thirty percent of mortgages in St. Louis are underwater

Dennis Norman
Dennis Norman

According to a report issued by First American CoreLogicmore than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, are in a negative equity position. In addition, according to the CoreLogic report, there are an additional 2.5 million mortgaged properties that are approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage.

firstamerican corelogic
The numbers for St. Louis are a little better than the U.S. numbers. In St. Louis, 170,871, or 29.50 percent of all properties with a mortgage, are in negative equity. A total of 208,259 mortgages, or 35.95 percent, are in near negative equity or negative equity.
The total property value of the property in St. Louis that is at risk of default is over $26.5 billion. By comparison in Chicago there is $134 billion of property at risk of default and $310 billion in Los Angeles.
Negative equity, often referred to as “underwater” or “upside down”, means the borrower owes more on their mortgage than the home is worth. Near negative equity is when mortgages are within five percent of being in a negative equity position. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.