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Unfortunately millions of borrowers are unable to qualify for mortgage refinancing, this year because their mortgage is underwater. That means their home is worth less than their mortgage lien. The homeownership rate could fall below 60% if homeowners who are deeply underwater end up losing their homes, a new
underwater mortgage report from mortgage data aggregator CoreLogic suggests. Some 10.78 million homeowners were “underwater” during the third quarter, meaning they owed more on their mortgages than their homes were worth. About 22.5% of all homeowners with mortgages had negative equity. That’s a slight decline from the 10.97 million homeowners who CoreLogic estimates were underwater in the second quarter, but the improvement was driven primarily by foreclosures rather than rising home values.
So far this year, the ranks of underwater mortgages have thinned by about 500,000, CoreLogic said. But price declines in some markets could bring to an end or even reverse recent improvements in negative equity. Many underwater homeowners will eventually lose their homes, and in the meantime may behave more like renters, failing to maintain their properties because they have no stake in them, the report noted.
The official homeownership rate reported by the Census Bureau for the third quarter was 66.9%, down from a peak of 69.2% in the last three months of 2004.
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