December 1, 2009

Are You ‘Underwater’ on your home?

Posted in Forclosure, Loan Modification tagged , at 7:02 pm by demetriagraves

New data available on the internet indicates that a staggering 23 percent of American home mortgages are “underwater” – that is, the owners owe more money than their property is currently worth.

As with many of the repercussions of the mortgage industry’s collapse, those hardest hit by underwater loans live in the states that were hotbeds of speculative and explosive real estate development during the boom:  California, Florida, Nevada and Arizona.

As job losses mount and Americans are faced with mortgage payments they can no longer afford, many are asking: Should I stay or should I go?

Here’s some troubling numbers, which some experts say could slow the housing sector’s recovery:

  • The total number of households with underwater mortgages comes to nearly 10.7 million, close to one in four homes.
  • Insiders apparently expect home prices to bottom out in 2011, meaning that the number of underwater homes is likely to increase between now and then.
  • As many as 5.3 million homeowners currently have mortgages worth at least 20 percent greater than the value of their home.

What does all this mean?

Underwater mortgages are problematic, but how will they affect the economy and the American people? Here are the main areas to consider:

  • Decreased mobility: People with too-hefty mortgages may find themselves tied to their house because they aren’t able to sell it to pay off their loans. This could mean not being able to move a significant distance away, even for a high-paying job offer.
  • Delayed recovery: Some of the underwater houses are likely to go into foreclosure. Some owners have reportedly already received default notices from their banks. If and when banks foreclose on these properties, more houses will be on the market, adding to the current real estate glut and potentially keeping prices low.
  • Conflicted lenders: Apparently some lenders are reluctant to reduce the principal on mortgage loans for fear that the move would set up expectations for all borrowers and lead to widespread abandonment of payments.

If you are in Southern California, your home is ‘underwater’ and you want to move or are having trouble making payments, please call my office for a free consultation. You do have choices and I want to help you make the best choice possible.

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