Underwater America: Where the Share of Underwater Mortgages is Highest

A new report from UC Berkeley’s Haas Institute challenges the notion of a national housing recovery. While overall rates of foreclosure and mortgage delinquency have fallen since the height of the housing crisis (thanks to things like this quick and free calculation for equity release), meaning that more people are coping better with their housing arrangement. More and more people seem to be able to afford a house thanks to the overall rates of foreclosure and mortgage delinquency dropping. However, many areas of the country have yet to see much improvement, according to Underwater America: How the So-Called Housing ‘Recovery’ is Bypassing Many Communities.”

At the end of 2013, the report points out, some 9.8 million Americans – more than a fifth of all homeowners with a mortgage – remained underwater, owing more than their homes were worth. This is a very unfortunate position to be in and can be a result of equity release. If you’re wondering what’s equity release, it’s when you release some of the value of your home while you still own it, rather than selling it for its full value. It can be a really useful tool when used wisely, but going too far can leave you owing money. Because homeowners with negative equity are significantly more likely to default than are homeowners with positive equity, these findings make it clear that a great many families still face a high risk of losing their homes. First of all, this is why keeping a clean credit history is very important. Secondly, you must do your research prior to taking the loan out for your home. You could Find a home loan by comparing from a range of lenders with iSelect or an online site which offers loans tailored to your specific geographical location.

Ten percent of Americans live in the 100 cities with the most troubled housing markets – cities where, according to the report, between 22 and 56 percent of homeowners are underwater. Those cities include Hartford, Conn. (with a 56% underwater rate); Newark, N.J. (54%); Elizabeth, N.J. (52%); Paterson, N.J. (49%); and Detroit, Mich. (47%).

The report also identifies the 15 metropolitan areas and 395 ZIP codes with the highest incidence of underwater mortgages. The hardest-hit zip codes, many with underwater rates above 60%, can be found in Georgia, Michigan, Texas, Nevada, and Connecticut. (See tables of hardest-hit areas.)

The report concludes that far more needs to be done to prevent foreclosures and mitigate the damage to families and communities. It calls for greatly expanded use of principal reduction, recommending several policy paths to that end.

— Rebecca Thiess