Nearly one in four homeowners (22.7 percent) owes more on his mortgage than the home is worth, according to California research firm CoreLogic.
Almost three-quarters of the underwater homeowners have above-market interest rates, says CoreLogic, but refinancing has proven to be tricky. In an effort to address the problem, last week President Obama announced the new and improved Home Affordable Refinance Program (HARP), which was rolled out in 2009 to help underwater homeowners with loans backed by Fannie Mae or Freddie Mac refinance without putting down additional cash. The revamped program is designed to reduce fees, loosen restrictions and incent lenders to include more homeowners. Homeowners still have to be current on their payments, which shuts out about 3.5 million seriously delinquent borrowers, according to the LA Times.
Homeowners who took out second mortgages (both home equity lines of credit and loans) during the housing boom are faring even worse: 38 percent of them are underwater. Even if they walk away from their homes and attempt a short sale, they still could owe the second mortgage. Loan modifications are harder to obtain for those with two mortgages and underwater borrowers have a more difficult time getting credit cards and car loans.
Regionally, the CoreLogic report shows that Nevada fared the worst of all the states, with 63 percent of its mortgages underwater. Arizona came in second at 50 percent, followed by Florida (46 percent) and Michigan (36 percent). Home values have fallen by as much as 50 percent in these areas.
Economists say the economic recovery will continue to be fitful until the housing market improves.
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