Company Overstated Number of Underwater Borrowers

November 24, 2009 No Comments »

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Here’s some good news: First American CoreLogic overestimated the number of underwater mortgages out there.

And now the bad news: Post-revision, nearly one in four still owe more on their mortgage than the property is currently worth.

Yeah, the snafu had pegged the negative equity rate at 33.8 percent, but that was using “the old formula.”

Apparently “the old formula” failed to take into account how much of a loan’s principal had been paid down, nor did it reflect how much of a home equity line of credit was actually being used.

And yes, some of the data may have been used in Congressional testimony and by the Center for Responsible Lending to highlight the severity of the mortgage crisis.

But that’s not necessarily a bad thing if it kicked foreclosure prevention efforts into high gear.

Hmm…regardless, 23 percent, or 10.7 million residential mortgages, were underwater in the third quarter, which is no small number.

Another 2.3 million mortgages have less than five percent home equity, so if home prices continue to fall, there could be quite a few more.

Nevada has the highest rate of negative equity at 65 percent, followed by Arizona at 48 percent, Florida at 45 percent, Michigan at 37 percent, and California at 35 percent.

Things don’t look much better after the correction, do they.

(photo: pinksherbetphotography)

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