Under the Federal Housing Finance Agency's new mortgage modification program, less than 1% of all seriously underwater properties might qualify for principal loan forgiveness, according to a report from housing data firm RealtyTrac.
RealtyTrac estimated that 33,622 properties could potentially qualify for the FHFA program, out of more than 6.7 million seriously underwater properties nationwide, according to a news release Thursday. RealtyTrac's analysis included properties with loan-to-value ratios of at least 125% that were actively in foreclosure, owner-occupied, and have an estimated loan amount no more than $250,000 on a loan that is guaranteed by Fannie Mae or Freddie Mac.
To determine what properties were eligible, RealtyTrac analyzed publicly recorded mortgage and deed-of-trust data it collects and licenses along with eligibility criteria for the new modification program. New Jersey had the highest share of properties possibly eligible for the program at 2.56% of seriously underwater homes, followed by Illinois and Florida. Philadelphia was the metropolitan area with the biggest portion of potentially eligible properties, with 1.65% of its seriously underwater homes possibly eligible.
"This new principal reduction program is designed to reach a highly targeted group of borrowers, so it's not surprising that the share of seriously underwater borrowers who potentially qualify is razor-thin," said Daren Blomquist, senior vice president at RealtyTrac, in the release.
Blomquist said that if the FHFA wanted "to make a more serious dent in the 6.7 million seriously underwater loans" it would need to open up its program homeowners who are not seriously delinquent or investors, noting that 98% of all seriously underwater loans are not actively in the foreclosure process and that 59% of all seriously underwater homes are not owner-occupied.
Altogether, the more than 6.7 million U.S. properties were seriously underwater at the end of the first quarter, representing 12% of all properties with a mortgage, RealtyTrac said. The figure is 8% lower than a year ago and 48% down from the peak reached in the second quarter of 2012.
Additionally, more than 12.3 million properties were equity-rich during the first quarter, which equates to 22% of mortgaged properties nationwide and is up roughly 11% from last year.
