Report Shows 20% of Mortgages Are Now Underwater.(Managing REO)

Byline: Brad Finkelstein

Santa Ana, CA-In its latest negative equity report, First American CoreLogic here found that 8.3 million borrowers or 20% of all mortgaged properties are now in a negative equity position, up from 7.6 million or 11% as of the end of September 2008.

During the fourth quarter of 2008, an average of 230,000 borrowers a month slid into a negative equity position. California led the way with a monthly average of 43,000 new negative equity borrowers, followed by Texas (16,000), Nevada (15,000), Florida (14,000) and Virginia (14,000).

In the last year, the value of mortgaged residential properties has declined by more than $2.4 trillion, and one half of this loss occurred in California.

The company found that there are an additional 2.2 million mortgaged properties approaching negative equity, which are defined as mortgages within 5% of being in a negative equity position. Negative equity and near negative equity mortgages combined account for 25% of all residential properties with a mortgage nationwide.

As of the end of 2008, the total value of residential properties was $19.1 trillion, down $2.4 trillion from $21.5 trillion in December 2007. California lost more than $1.2 trillion in housing value last year, accounting for roughly half of the national decline in property values.

Nevada has the highest percentage of negative equity as more than half of all mortgage borrowers in that state are now "upside down." The average loan-to-value ratio for properties with a mortgage in Nevada was 97% or less than $8,000 in equity, leaving the typical mortgaged homeowner with virtually no cushion for the rapidly declining home values.