New Data Shows Nearly One-Third Of All Mortgages Are Underwater

Cincinnati-Middletown Shows 37.25 Percent of Mortgages in Negative Equity

More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. June's negative equity share was slightly lower than the 32.5 percent as of the end of March 2009 and it reflects the recent flattening of monthly home price changes. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.

In Cincinnati-Middletown, 164,953, or 37.25 percent of all properties with a mortgage, are in negative equity. A total of 194,036 mortgages, or 43.82 percent, are in near negative equity or negative equity.

The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. In California, the aggregate value of homes that are in negative equity was $969 billion, followed by Florida ($432 billion), New Jersey ($146 billion), Illinois ($146 billion) and Arizona ($140 billion). Los Angeles had over $310 billion aggregate property value that was in a negative equity position, followed by New York ($183 billion), Miami ($152 billion), Washington, D.C. ($149 billion) and Chicago ($134 billion). In Cincinnati-Middletown, $24,414,538,830 total property value was at risk of default.

Negative equity, often referred to as "underwater" or "upside down," means the borrower owes more on their mortgage than the home is worth. Near negative equity is when mortgages are within five percent of being in a negative equity position. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

The distribution of negative equity is heavily skewed to a small number of states as three states account for roughly half of all mortgage borrowers in a negative equity position. Nevada (66 percent) had the highest percentage where nearly two-thirds of mortgage borrowers had negative equity. In Arizona (51 percent) and Florida (49 percent) half of all mortgage borrowers had negative equity. Michigan (48 percent) and California (42 percent) round out the top five states.

The top five states' negative equity share was 47 percent, compared to 25 percent for the remaining states. In numerical terms, California (2.9 million) and Florida (2.3 million) had the largest number of negative equity mortgages, accounting for 5.2 million or 35 percent of all negative equity loans. Ohio (862,000), Texas (777,000) and Arizona (706,000) were also among the top five ranked states for the number of loans with negative equity.

"Negative equity continues to be the dominant driver of the mortgage market because it leads to foreclosures in the event a borrower experiences some kind of economic shock: job loss, illness or other adverse situation. Given that negative equity did not increase this quarter and home price declines are moderating or flattening, it may indicate we are at the peak of the negative equity cycle. However, until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated," said Mark Fleming, chief economist for First American CoreLogic.

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Methodology*:

Methodology*:

First American CoreLogic has created state- andCBSA-level negative equity estimates for all single-family residentialproperties in the U.S. The data includes 47 million properties with amortgage, which accounts for over 90 percent of all mortgages in theU.S.*. The data was revised for 2009 and the revisions included a largeaddition of junior liens (including multiple junior liens), additionalresidential property types that were previously excluded and a broaderrange of home values. The net impact of the revisions was an increasein negative equity.

First American CoreLogic used its publicrecord data as the source of the mortgage debt outstanding (MDO) and itincludes 1st mortgage liens and junior mortgage liens in order tocapture the true level of mortgage debt outstanding for each property.The current value was estimated by using the First American CoreLogicAutomated Valuation Models (AVM) for every residential property in theU.S. The data was filtered to include only properties valued between$30,000 and $30 million because AVM accuracy tends to quickly worsenoutside of that value range.

The amount of equity for eachproperty was determined by subtracting the property's estimated currentvalue from the mortgage debt outstanding. If the mortgage debt wasgreater than the estimated value, then the property is in a negativeequity position. The data was created at the zip code level andaggregated to the state, CBSA and U.S. totals.