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Nearly 10% of Iowa homeowners ‘under water’ with mortgage

George C. Ford, CR Gazette –

A new report shows almost 10 percent of Iowa homeowners were “under water” in the final quarter of 2011, meaning they owed more on their mortgage than the value of their home.

Santa Ana, Ca;if.-based CoreLogic said 9.9 percent of the 386,901 mortgage holders in Iowa, or 38,125 homeowners were “upside down” in terms of how much they owe compared with the value of their house or condominium. Another 17,232 homeowners are nearly under water, according to the CorLogic data.

Negative equity, often referred to as “upside down” or “under water” can occur becuase of a decline in the value of a home, an increase in mortgage debt due to a sizeable second mortgage, or a combination of both.

Nationally, 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. That’s up from 10.7 million properties, 22.1 percent, in the third quarter of 2011.

Another 2.5 million borrowers had less than 5 percent equity in their home, referred to as near-negative equity, in the fourth quarter.

“Due to the seasonal declines in home prices and slowing foreclosure pipeline which is depressing home prices, the negative equity share rose in late 2011.” said Mark Fleming, chief economist with CoreLogic. ”The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason we have such a significant foreclosure pipeline.

“While the economic recovery will reduce the propensity of the inability-to-pay trigger, negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures.

Nevada had the highest negative equity percentage with 61 percent of all of its mortgaged properties underwater, followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent).

It was the second consecutive quarter that Georgia was in the top five, surpassing California (30 percent), which previously had been in the top five since CoreLogic began tracking negative equity in 2009.

The low end of the market is where most of the negative equity is concentrated, according to CoreLogic. For low-to-mid value homes valued at less than $200,000, the negative equity share is 54 percent for borrowers with home equity loans, over twice the 26 percent for borrowers without home equity loans.

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