New CoreLogic data indicate HARP 2.0 is likely to have more steam than most would expect.
According to CoreLogic’s Negative Equity Report, nearly 17 million borrowers who were underwater by the end of the first quarter had loan-to-value ratios of 80% to 125%, which “purely from an LTV perspective” makes them eligible for the original Home Affordable Refinance Program.
The removal of the 125% LTV cap by HARP 2.0 means if LTV alone is the qualifying criteria over 22 million borrowers are currently eligible for HARP 2.0.
Reducing the number of households with negative equity “is an important step toward reducing future mortgage default risk,” noted CoreLogic’s chief economist, Mark Fleming, who expects the overall stagnating economic recovery “will likely slow housing market recovery in the second half of this year.”
Meanwhile, by the end of the first quarter 11.4 million or 23.7% of all residential properties with a mortgage continued to be underwater, a 1.5% decrease compared to the last quarter of 2011.
More than 700,000 households regained a positive equity position in the first quarter.
The report also shows that an additional 2.3 million borrowers had less than 5% equity, which is considered at risk or near-negative equity.
Of the 11.4 million upside-down borrowers, 6.9 million have first liens without home equity loans with an average mortgage balance of $212,000 and were up to $47,000 underwater.
On average first-lien-only borrowers had a negative equity share of 19%. Up to 42% of these first-lien-only borrowers had LTV ratios of 80% or higher.
The remaining 4.5 million underwater borrowers had both first and second liens consisting of an average mortgage balance of $299,000, and were upside-down by an average of $82,000.
More than 60% of borrowers with first liens and home equity loans had combined LTVs of 80% or higher.
Rebounding home prices, a healthier balance of real estate supply and demand, and a slowdown in distressed sales activity helped reduce the negative equity share, Fleming said.
Data also show that while a trend of improvements in negative equity rates is taking hold in the hardest hit areas, they continue to top the nation’s negative equity chart.
Nevada had the highest negative equity ratio at 61% of all mortgaged properties, followed by Florida with 45%, Arizona 43%, Georgia 37% and Michigan 35%. Combined these five states have an average negative equity share of 44.5%.
