The number of borrowers with negative equity declined slightly in Q110, but underwater mortgages and borrowers with less than 5% home equity accounted for 28% of all residential properties, according to the latest data from CoreLogic. More than 11.2m, about 24% of all residential properties with mortgages were in negative equity at the end of Q110. That’s down slightly from 11.3m, or 24%, Q409. The state with the highest rate of negative equity mortgages continues to be Nevada, where 70% of all properties are underwater, followed by Arizona (51%), Florida (48%), Michigan (39%) and California (34%). Las Vegas remains the core-based statistical area (CBSA) with the greatest rate of underwater mortgages. There, 75% of mortgaged properties are underwater. Other top CBSAs include the California CBSAs of Stockton (65%), Modesto (62%), Vallejo-Fairfield (60%), as well as the Arizona capital of Phoenix (58%). In addition, Phoenix had more than 550,000 underwater borrowers, the most of any metro market in the US, followed by Riverside, Calif. (463,000), Los Angeles (406,000), Atlanta (399,000) and Chicago (365,000). Not only did the number of underwater borrowers decline, but the amount of negative equity also dropped for many. The number of borrowers with a mortgage loan-to-value (LTV) of 125% or more totaled 4.9m, or 10.4%, down from 5m, or 10.6%. The aggregate dollar value of negative equity for borrowers with 125% LTV was $656bn. Research has shown borrowers are more likely to strategic default once their LTV reaches 125%. “The two most important triggers of default — negative equity and unemployment — have stabilized over the last six months,” said CoreLogic chief economist Mark Fleming. “As house prices grow again and borrowers pay down their mortgage debt, negative equity levels will begin to diminish,” Fleming added. “The typical underwater borrower is likely to regain their lost equity over the next five to seven years.” CoreLogic said 38% of borrowers with second mortgages were underwater, compared to 19% of borrowers that did not have a junior lien. In addition, CoreLogic said the foreclosure rate for borrowers with junior liens was 4%, compared to 2% for borrowers without junior liens. The dataset for the statistics includes 47m residential properties with a mortgage, accounting for more than 85% of all mortgages in the US and relies on public record data to determine the amount of outstanding mortgage debt. Current values were derived by the company’s automated valuation model (AVM). CoreLogic, formerly known as First American CoreLogic, is a subsidiary of the First American Corp. (FAF), but is scheduled to split from its parent firm and become its own standalone, publicly traded company. Write to Austin Kilgore. The author held no relevant investments.

More: