Friday, 26 February 2010

Underwater Mortgages Hit 11.3 Million

There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure.

New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America.The mortgage numbers are much worse when homes with equity of less than 5% are included. First American reports that ”an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity.” That means that three out of ten homes have virtually no financial value to their owners.
http://247wallst.com/2010/02/23/underwater-mortgages-hit-11-3-million/

Artificially low interest rates and easy-to-get housing loans created a bubble of debt and high prices that could not be sustained. House prices increased when they should not have moved. The Federal authorities and the big banks that created this mess have a lot to answer for.

[Posted at the SpookyWeather blog, February 26th, 2010.]

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