Study: More Home Mortgages Are Upside Down

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An increasing number of U.S. homeowners are underwater in their homes — meaning they owe more than the property is worth.

In 2008, U.S. residential property shed $2.4 trillion in value, which left 8.3 million mortgages in what experts describe as "a negative equity position." That's 20 percent of all mortgages in the country, according to First American CoreLogic.

The real estate tracking company released a report Wednesday that shows California has the largest number of underwater mortgages (1.9 million). Nevada has the largest share of such mortgages — 55 percent. Michigan ranks second, with the share of upside down mortgages at 40 percent. Arizona is third at 32 percent. Florida and California both have 30 percent of their mortgages underwater.

"The accelerating share of negative equity, combined with deteriorating economic conditions, means that mortgage risk will continue to increase until home prices and the economy begin to stabilize," says Mark Fleming, chief economist for First American CoreLogic.

The company analyzed data for more than 85 percent of all mortgages in the U.S. and learned the problem is worsening. At the end of the third quarter, it reported 18 percent of all mortgages were underwater.

Tucker Roberts, 31, of Crested Butte, Colo., purchased a townhouse for just under $500,000 two years ago. He was hoping to sell it for a profit soon, but instead prices have gone down.

"So now I own a house that's worth, probably, $150,000 to $200,000 less than my total mortgage is on the place," says Roberts.

His salesman salary ranges from $50,000 to $75,000 a year, so the $3,400 monthly mortgage is nearly impossible to afford. Until recently he had two roommates, but now that they're gone he's burning through his savings and says he may have to liquidate other assets to keep current on the payments.

"By spring of next year if I can't get my house sold or I can't start making a lot more money, there'll be a three bedroom, 2 1/2 bath house for sale really cheap through a bank," says Roberts.

Roberts is among those a new U.S. Treasury Department program is designed to help. The $75 billion foreclosure relief plan is for those facing imminent hardship. It offers cash incentives to lenders who modify mortgages on single-family houses up to $729,750.

The U.S. House of Representatives also is considering a bill that would let federal judges dismiss mortgage debt for homeowners who file bankruptcy. Roberts says he considers bankruptcy a "moral dilemma," but unless something changes soon, he may run out of options.

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