Analysts: Unemployment Matters Less Than CLTV

Homeowners with combined loan-to-value ratios greater than 120% are more likely to fall behind on their payments than other borrowers who lose their job, according to analysts at the Amherst Securities Group. At a CLTV ratio above 120%, job loss "amplifies the likelihood a borrower will default," the analysts say in an Amherst Mortgage Insight article entitled "Negative Equity Trumps Unemployment in Predicting Defaults." The ASG analysts contend that the loss of a job is more of a "catalyst" that can trigger default. "When confronted with a catalyst that forces re-evaluation of financial priorities, the borrower will place an underwater mortgage much further down on the list. This pattern is most clear for prime borrowers," the article says. As of Sept. 30, an estimated 5.3 million or 11.3% of mortgaged homeowners have CLTVs of 120% or greater, according a recent report by First American CoreLogic. Fannie Mae recently reported 20% of its single-family mortgages with LTV ratios greater than 100% are 90-days or more past due.