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Negative Equity Freezes Lowest Tier Owners

One reason inventories for first-time buyers are chronically depleted is that lower priced homes continue to bear a more of the brunt of negative equity that those priced higher.

A new report from Black Knight found that in March the number of underwater borrowers decreased by 1.6 million from this time last year and that the negative equity population has fallen to just over 4 million.  Some 77 percent of borrowers in foreclosure are underwater; 72 percent of those 90 or more days past due are underwater.

Higher-end properties in the top 20 percent in home prices largely escape negative equity positions but at the state level, borrowers in the bottom 20 percent of homes by price are nine times more likely to be underwater on their mortgages than those in the top 20 percent.

“In terms of price tiers, we found that the bottom 20 percent of homes by price continue to struggle with negative equity,” said Ben Graboske, senior vice president, Black Knight Data and Analytics.

Nevada and Florida lead the nation in negative equity rates while Florida and California have highest number of properties underwater.

“Our most recent data shows that just over 8 percent of borrowers are currently underwater on their mortgages, representing a nearly 30 percent reduction in the negative equity rate since last year. We also observed that 29 percent of underwater borrowers are seriously delinquent on their mortgages and that borrowers in negative equity positions make up 77 percent of all active foreclosures. In fact, one of every three borrowers in active foreclosure has a current loan-to-value ratio of 150 or more, meaning they owe 50 percent more than their homes are worth,” said Graboske.

Black Knight also found that the mortgage delinquency rate declined farther in March than it has in the past nine years.

“In addition, declines were seen across all stages of delinquency (30, 60, 90 and 120+ days), with 30-day delinquencies hitting their lowest level in over 10 years. The month’s data also showed that “roll rates” (loans rolling into a more delinquent status) have improved across the board as well. For every 10,000 loans that were current at the end of February, only 73 borrowers missed a payment in March, marking the lowest current-to-30 roll rate in over 15 years. Roll rates from 30-to-60 and 60-to-90 days delinquent hit their lowest levels since March 2006. Finally, the rate of loans curing from 30-days delinquent to current status was 40.7 percent, the highest level since March 2005 and slightly above the 2000-2005 average of 40.4 percent,” Graboski said.

Other key results:

Total U.S. loan delinquency rate: 4.70%:



Month-over-month change in delinquency rate:  – 12.18%

Total U.S. foreclosure pre-sale inventory rate:  1.55%

Month-over-month change in foreclosure pre-sale inventory rate:  – 2.12 %

States with highest percentage of non-current* loans: MS, NJ, LA, NY, ME

States with the lowest percentage of non-current* loans: MT, MN, SD, CO, ND

States with highest percentage of seriously delinquent** loans: MS, RI, LA, AL, NJ

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

**Seriously delinquent loans are those past-due 90 days or more.


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