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Sob: 1 In 5 Mortgages Are Underwater

From those spreaders of panic at Reuters:

One in five U.S. mortgage borrowers are underwater

By Jonathan Stempel Jonathan Stempel

NEW YORK (Reuters) – One in five U.S. homeowners with mortgages owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows.

About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.

Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows…

Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages

Funny, but we don’t recall hearing about the sufferings of these same mortgage borrowers when their housing values were rocketing upwards.

Also, isn’t this often the case with many things that are bought over time?

For instance, once you drive your new car off the lot, isn’t it often worth less than what you owe on it?

Anyway, are we supposed to be in the business of making sure that no one ever makes a bad bargain?

Isn’t it enough that we give mortgage holders a tax break? (Renters don’t get any tax breaks.)

Moreover, to quote one of our foremost housing experts and former President: “life is unfair.”

Besides, who really doubts that housing prices will not soon go up? They always have. They always will. It is only a question of time.

So will these people who get bailouts and other breaks have to pay back the US taxpayer with a windfall profit tax?

This article was posted by Steve on Wednesday, March 4th, 2009. Comments are currently closed.

17 Responses to “Sob: 1 In 5 Mortgages Are Underwater”

  1. curvyred says:

    Not too worry TCO has a plan to help those poor “victims” of the mortgage industry:


    “It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets,” Treasury Secretary Timothy Geithner said in a statement.”

  2. catie says:

    We’re underwater less than a year after purchasing our humble abode but we can still make the payments on it. My neighbor went into foreclosure and I wasn’t surprised because they didn’t have a stick of furniture in their living and dining rooms, and had fold up tables in their kitchen and den. They bought the house in 06 and shouldn’t have gotten it in the first place.
    On the flipside we doubled what we paid for the Hawaii house when we sold it so it’s pretty much even in the end.

  3. proreason says:

    “Isn’t it enough that we give mortgage holders a tax break?”


    – mortgage interest is deductable.
    – RE taxes are deductable.
    – Sub-prime borrowers received mortgages SUBSTANTIALLY below market….thanks to Drooling Barney.
    – low-income borrowers might have also received a state-sponsered federal tax credit
    – in addition, every state has numerous mortgage assistance programs for first time/low income buyers.

    It’s way way more than “a tax break”.

    But it won’t be enough until housing is “free” for The Moron’s supporters. Free, that is, in the sense that they won’t pay for it. YOU will.

  4. Odie44 says:

    Unless an investment of any kind has a guaranteed rate of return – there is always the risk it will go to zero.

    House, stock, gold, car, etc.

    It is Investment 101 – and needs to be retaught to the masses. Clearly their expectation and basic comprehension skills are lacking.

  5. U NO HOO says:

    Anyone seen Glenn Beck’s chart of housing values?

    Very interesting if true.

    Housing may not come back to its peak anytime soon, if ever.

    That would not be a bad thing.

  6. pdsand says:

    Unless you make a substantial down payment you are guaranteed to go underwater instantly and stay underwater for at least the first several years. And as we know, the point of the Democrat’s home loan policy was to get people into mortgages with no or little down payment. And as we also know, the Democrat’s home loan policy artificially inflated the number of buyers in the market, putting artificial upward pressure on the prices of homes particular in major cities across the U.S., the definition of a housing bubble which has now burst. These guys have some bunch of nerve to go around knowingly creating a problem, then saying, ‘good god, there’s a problem! Let’s poor money on it!’

    • TwilightZoned says:

      It’s common knowledge when you purchase a home you need to remain in it for at least the first 5 years due to all the interest being paid on it. Or at least it was when common sense reigned.

  7. pdsand says:

    I was saying years ago that the land speculation we saw going on all around us was going to be the ruin of our country. I saw Glenn Beck the other day talking about how the home values adjusted for inflation stayed steady around or slightly over 100k for the last half century, then spiked in the few years leading up to 2006 to something way higher, and it is that spike that the Democrats are now defending like it is the norm. Insanity.

  8. Colonel1961 says:

    I seem to remember the tales from some of my SoCal friends and their multi-million dollar homes and single year returns of thirty and forty percent. And, of course, this was happening under the ‘W’, whom they despised. I’ll have to ping a few of them this afternoon and see how they’re liking GoBama’s destruction of our economy…

    • jr says:

      colonel, when you talk to your freinds in socal can you ask them a few questions about indymac bank if they had accounts there? where did they go to get their cash for accounts insured by fdic to $100,000.00? did they infact get their money back or were they told its in the bank down the street and they cant actually withdraw the money at this time? will any of them trust another bank or the fed? simply curious, thanks

  9. armadillo says:

    The article doesn’t mention how many of these underwater mortgages were purchase money mortgages vs. home equity “use-your-home-as-an-ATM” mortgages. As mentioned above, unless you made a down payment, the likelihood of being upside down early in the term is pretty high. Furthermore, if you put no money down you actually contributed to home price escalation (too much demand chasing too few homes).

    But, separate out the people who bought at the top of the market and look at a different type of homeowner. Namely, the homeowner who had some home equity which he mortgaged for something other than home maintenance reasons (e.g. roof repair). If he is underwater, why should I care? He got cash in the form of a loan for his inflated equity. Maybe he got more than a realistic appraisal or a less aggressive loan-to-value ratio would justify, but so what? He still has a place to live and shelter his family. If he didn’t fritter the proceeds away, he has something of equal value in place of the lost home value.

    The party at risk in that situation is the lender. If the homeowner takes bankruptcy or abandons the home, the lender takes the loss.

    Now that the Obama administration has admitted it is impractical to review original loan documents to screen out fraudulent applications, at least they could distinguish between original purchase money mortgages and home equity loans.

    • 1sttofight says:

      I was brought up to believe that your house payment should not be over 20% of your monthly income. It seems to have worked for me. Mine is not the nicest house in the neighbor hood but my house payments are on time every month.

    • jobeth says:

      1st you are exactly right on.

      When my husband and I married 10 years ago we desparately wanted the 5 bedroom 3 bath home we looked at. And we could have gotten it.

      We have 7 grown children between us w/families who visit often. We could have really used those extra bedrooms.

      We looked at each other though and knew without much more talking we would take the 3/2 w/family room. Nice but average home.

      We still miss a room for the computers and the extra bedrooms for the kid’s visits…but we knew full well, that the 5/3 would have been a real drain and drag on our lives.

      We are average people living in an average house. That should be enough for most of us who don’t have the kind of $$ to afford these over the top homes. Peace of mind is a blessing.

    • catie says:

      My mother still watches the stupid NBC news every night. She was telling me about some tale of woe with some woman who was losing her home that she lived in for 20 years due to foreclosure. What they finally mentioned in the end was she had re-financed a few times and used the money for trips, cars, electronics, etc but the poor woman was losing her house. Somebody call the wambulance.
      1st-I was raised on the 20% principle myself. When I bought my first townhouse after working 3 jobs for 6 years it was 15%. The broker wanted me to “get more options” but I told him I didn’t want to have to work 3 jobs the rest of my life. Our current home is 18% and we’re able to make it fine. It’s just annoying to have to bail out the losers who couldn’t afford it in the first place (the interest only, no money down, 105% mortgage crowd, house=ATM folks) who are generally the same bunch who take advantage most of the time anyway.

    • pdsand says:

      Right on all accounts, I have an in-law who lost his house of 30 years last year, he had taken a second mortgage. People make their mistakes.
      I have a co-worker who constantly lumps herself in with the bloodsuckers because she had a house foreclosed on, it was because she lost her old job in Oklahoma and moved to Colorado for a new job, walking away from the old house. I try to tell her, your situation is a little different of course you know, but she doesn’t buy it. She also says how they modified her mortgage after the foreclosure, and waived all interest, so she only had to pay x amount with no interest until paid off. I say that’s not a “modification” in the Obama sense, because she wasn’t staying in her house, but she doesn’t buy that either.

  10. TwilightZoned says:

    It amazes me the formula lenders use to quote affordability. I know when I received a quote a number of year ago now, it was way more than I knew I could afford. Are some people really so stupid as to not realize what they can actually afford? Oh, wait…these are the same people who will believe anything, even O’s pre-election promises.

  11. Liberals Demise says:

    When do we go after the bastards that caused this to happen? This is far more important than persueing Bush for firing Lawyers during his tenure. Don’t anyone care about how to avoid this happening again? I’m begining to agree that this nation NEEDS to go rock bottom. Rid ourselves of the bottom feeders and allow the strong to survive.

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