Borrowers who are in negative equity continued to increase across the country through the end of last year, according to data from CoreLogic.
Out of 48 million residential properties that have a mortgage, 11.1 million, or 22.8%, were in negative equity at the end of the fourth quarter. This is an increase from 10.7 million properties, or 22.1%, in the previous quarter.
An additional 2.5 million borrowers had less than 5% equity, also known as near-negative equity, during the last three months of last year, CoreLogic said.
Mark Fleming, chief economist with CoreLogic, Santa, Ana, Calif., said the number of underwater borrowers—people who owe more on their mortgages than their homes are worth—has reached the same levels as the third quarter of 2009 when the analytic firm started tracking this data.
“Due to the seasonal declines in home prices and slowing foreclosure pipeline which is depressing home prices, the negative equity share rose in late 2011,” Fleming said. “The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason we have such a significant foreclosure pipeline.”
Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth.
Nevada had the highest negative equity percentage with 61% of all of its mortgaged properties underwater, followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%). The final three months of 2011 marks the second consecutive quarter that Georgia was in the top five, surpassing California (30%), which previously had been in the top five since 2009.
The top five states combined have an average negative equity share of 44.3%, while the remaining states have a combined average negative equity share of 15.3%.
Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without home equity loans. This group of borrowers has an average mortgage balance of $219,000 and is underwater by an average of $51,000 or an LTV ratio of 130%.
The remaining 4.4 million underwater borrowers had both first and second liens. Their average mortgage balance was $306,000 and they were upside down by an average of $84,000 or a combined LTV of 138%.
CoreLogic said the majority of the negative equity is found in low-to-mid value homes priced at less than $200,000.
Fleming did not express optimism about borrowers getting out of negative equity anytime soon. “While the economic recovery will reduce the propensity of the inability to pay trigger, negative equity will take an extended period of time to improve and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures,” he said.
