More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.
That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period.
Many borrowers continue to be quickly wiped out — CoreLogic economist
It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk.
As of December 2011, the latest figures available, 31% of the U.S. home loans that were in negative equity – in which the outstanding loan balance exceeds the value of the home – were FHA-insured mortgages, according to CoreLogic.
Many borrowers, particularly since late 2010, thought they were buying at the bottom of a housing market that had already suffered steep declines, but have been caught out by a continued fall in prices in wide swaths of America.
Even for loans taken out in December – less than four months ago and the last month for which data is available – nearly 44,000 borrowers, or about 7.5% of the total, now find themselves under water.
“The overwhelming majority of the U.S. is still seeing home prices decline,” said CoreLogic senior economist Sam Khater. “Many borrowers continue to be quickly wiped out.”
Financial Post
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