A convenient location, good schools, well-maintained homes and a modest inventory of properties for sale: These are the traditional cues that homeowners and buyers look for to assure that home values will hold up in a neighborhood.

But whether values sink or stick is now dependent on an “invisible” factor: the mortgage balances of homeowners in the area.

Approximately one-third of all mortgage holders have a loan balance that’s higher than the current value of their home, according to a recent government report on federal anti-foreclosure programs.

Homeowners in this unfortunate position are dubbed “underwater” borrowers. 

As their tide of debt rises above what they could get from selling, these owners have less incentive to care for their properties, which depresses area prices further, finds the Congressional Oversight Panel’s report on the Troubled Asset Relief Program, or TARP. And if they experience financial distress, underwater owners are more likely to lose the property to foreclosure, with the resulting empty homes adversely impacting prices up and down the block.

Spotting signs of home abuse

Sometimes it’s evident that mortgage balances are sabotaging neighborhood values.

For example, John Sullivan, president of the National Association of Exclusive Buyer Agents, says he’s encountered relatively new subdivisions that normally would still look fresh, with finishing touches being added, like additional landscaping.

Instead, lawns are scraggly, windows are dirty and other signs of home abuse abound.

It’s a safe assumption, says Sullivan, that owners got “easy 100 percent financing” a few years ago when the development began, and now price declines have left owners in the red — and some may have already been foreclosed upon.

Many underwater owners are clustered in newer developments, since those who took out a mortgage in 2006 and 2007 are the most likely to have debt toppling their home’s value, says Sam Khater, senior economist with First American CoreLogic.

Still, with one-third of all borrowers under water, not all are found in new developments that already exhibit telltale signs of owners’ mortgage misfortune.

In fact, says Khater, it’s not until mortgage debt falls about 20 percent below a home’s value that foreclosures start occurring with more frequency.

A matter of public record

Because neighborhoods cluttered with underwater owners are likely to see further value drops, Evan Feldman, an agent with ZipRealty in Wellington, Fla., says he tries to alert buyers to this threat: “I try to educate them as much as I can; I don’t want them saying later, ‘How could you not tell me this?'”

While it may seem that the size of a homeowner’s mortgage is strictly between the homeowner and the lender, mortgage data are public record. County recorders or county clerks record a lien for the amount of a mortgage each time a loan is made.

Some counties offer these records online to the public. Users can search using a borrower’s name, or by address or by securing personal identification numbers from other online tax records.

Although it may feel as if they’re prying into neighbors’ financial lives, homeowners worried about what’s happening to values in their neighborhood can use these data as another indicator of what’s ahead.

Online access is not available in all counties. Many still keep records at the courthouse the old-fashioned way, says Jacqueline Byers, director of research and outreach, National Association of Counties.

Remember, too, warns Byers, that mortgage balances recorded don’t reflect amounts that borrowers have paid down through monthly payments or prepayments.

Consumers in counties not providing online access may find it too bothersome to dig through paper records. However, real estate agents often have the ability to get the data online through services that mine public records and sell it the information to subscribing real estate businesses, says Khater, who notes that his own company has a subsidiary providing just such services.