Fewer Americans Struggling With Underwater Homes

As a result of the national housing crisis that led to millions of homes nationwide losing significant portions of their values, many borrowers across the country owe more on their mortgages than their properties are worth. However, those ranks are thinning thanks to continual improvements in the housing market.

With prices continuing to rise and more borrowers finding themselves in a stronger financial position, many homeowners who were previously dealing with negative equity on their mortgages are now no longer doing so, according to the latest Mortgage Monitor report from Lender Processing Services. Through the end of March, the number of underwater homeowners nationwide had fallen some 41 percent during the past year, dropping the total number of borrowers who owe more than 100 percent of their properties’ value to just 9 million. Despite those improvements, though, about 18 percent of all active mortgages are still underwater.

Other improvements seen in the national housing market include far lower rates of “problem loans,” which are defined as those that are now seriously delinquent but were in good standing as recently as six months ago, the report said. In all, the portion of the total mortgage market comprising these loans slipped to just 0.84 percent of all outstanding balances, marking the first time since 2007 that the rate has been below 1 percent. It still has some ways to go to reach the average of 0.55 percent observed prior to the housing crisis, from 2000 to 2004.

“There has always been a clear correlation between higher levels of negative equity and new problem loan rates,” said Herb Blecher, senior vice president for applied analytics at LPS . “Looking at the March data, we see that borrowers with equity are actually outperforming the national average – at 0.6 percent, this group is quite close to pre-crisis norms. The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value (LTV) ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.”

In all, the total U.S. loan delinquency rate came in at 6.59 percent for March, down 3.13 percent from the total seen in February, the report said.

[Featured Products: Research and Compare Mortgage Rates at Credit.com.]

Get matched with a personal loan that’s right for you today.

Learn more

The housing market is expected to continue improving for some time, as efforts to depress interest rates continue to keep affordability high even as prices keep rising.

Image: iStockphoto