CoreLogic® Reports 1.4 Million Borrowers Returned To "Positive Equity" Year To
Date Through The End Of The Third Quarter Of 2012
--Number of Residential Properties in Negative Equity Declines Again in Q3
IRVINE, Calif., Jan. 17, 2013
IRVINE, Calif., Jan. 17, 2013 /PRNewswire/ --CoreLogic (NYSE: CLGX), a
leading provider of information, analytics and business services, today
released new analysis showing approximately 100,000 more borrowers reached a
state of positive equity during the third quarter of 2012, adding to the more
than 1.3 million borrowers that moved into positive equity through the second
quarter of 2012. This brings the total number of borrowers who moved from
negative equity to positive equity Septemberyear-to-date to 1.4 million. The
analysis also shows 10.7 million, or 22 percent of all residential properties
with a mortgage, were in negative equity at the end of the third quarter of
2012. This is down from 10.8 million properties, or 22.3 percent, at the end
of the second quarter of 2012. An additional 2.3 million borrowers had less
than 5 percent equity in their home, referred to as near-negative equity, at
the end of the third quarter.
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Negative equity, often referred to as "underwater" or "upside down," means
that borrowers owe more on their mortgages than their homes are worth.
Negative equity can occur because of a decline in value, an increase in
mortgage debt or a combination of both.
Together, negative equity and near-negative equity mortgages accounted for
26.8 percent of all residential properties with a mortgage nationwide in the
third quarter of 2012, down from 27 percent at the end of the second quarter
in 2012. Nationally, negative equity decreased from $689 billion at the end of
the second quarter in 2012 to $658 billion at the end of the third quarter, a
decrease of $31 billion. This decrease was driven in large part by an
improvement in house price levels. This dollar amount represents the total
value of all homes currently underwater nationally.
"Through the third quarter, the number of underwater borrowers declined
significantly," said Mark Fleming, chief economist for CoreLogic. "The
substantive gain in house prices made in 2012, partly due to tight inventory
caused by negative equity's lock-out effect, has paradoxically alleviated some
of the pain."
"There has been steady progress relative to reducing negative equity and its
effects in 2012, but with nearly one quarter of borrowers still underwater,
we have a long way to go," said Anand Nallathambi, president and CEO of
CoreLogic. "As we look ahead into 2013, we expect to continue to see more
borrowers escape the negative equity trap, which will be a strong positive for
the housing market specifically and the broader economy generally."
Highlights as of Q3 2012:
oNevada had the highest percentage of mortgaged properties in negative
equity at 56.9 percent, followed by Florida (42.1 percent), Arizona (38.6
percent), Georgia (35.6 percent) and Michigan (32 percent). These top five
states combined account for 34 percent of the total amount of negative
equity in the U.S.
oOf the total $658 billion in aggregate negative equity, first liens
without home equity loans accounted for $323 billion aggregate negative
equity, while first liens with home equity loans accounted for $334
o6.6 million upside-down borrowers hold first liens without home equity
loans. The average mortgage balance for this group of borrowers is
$214,000. The average underwater amount is $49,000.
o4.1 million upside-down borrowers possess both first and second liens. The
average mortgage balance for this group of borrowers is $298,000. The
average underwater amount is $82,000.
oApproximately 41 percent of borrowers with first liens without home equity
loans had loan-to-value (LTV) ratios of 80 percent or higher and
approximately 61 percent of borrowers with first liens and home equity
loans had combined LTVs of 80 percent or higher.
oAt the end of the third quarter 2012, 17.1 million borrowers possessed
qualifying LTVs between 80 and 125 percent for the Home Affordable
Refinance Program (HARP) under the original requirements first introduced
in March 2009. The lifting of the 125 percent LTV cap via HARP 2.0 opens
the door to another 4.6 million borrowers.
oThe bulk of negative equity is concentrated in the low end of the housing
market. For example, for low- to mid-value homes (less than $200,000), the
negative equity share is 28.7 percent, almost twice the 14.6 percent for
borrowers with home values greater than $200,000.
oAs of Q3 2012, there were 1.8 million borrowers who were only 5 percent
underwater, who if home prices continue increasing over the next year,
could return to a positive equity position.
Figure 1: Negative Equity Concentrated Mostly in Sand States
Q3 2012 Equity Share
Figure 2: Distribution of Equity Widely Varies by State
Q3 2012 Equity Distribution
Figure 3: National Distribution of Home Equity
Negative Equity Share by LTV Segment
Map 1: CoreLogic Negative Equity Share by County
State Table: CoreLogic Q3 Negative Equity by State*
*This data only includes properties with a mortgage. Non-mortgaged properties
are by definition not included.
CoreLogic data includes 48 million properties with a mortgage, which accounts
for over 85 percent of all mortgages in the U.S.* CoreLogic uses its public
record data as the source of the mortgage debt outstanding (MDO) which
includes both first mortgage liens and second liens and is adjusted for
amortization and home equity utilization in order to capture the true level of
mortgage debt outstanding for each property.The calculations are not based on
sampling, but use thefull data set to avoid any potential adverse selection
due to sampling. The current value of MDO is estimated using the CoreLogic
GeoAVM Core^™ Cascade, a suite of CoreLogic Automated Valuation Models (AVMs)
for residential properties designed to select the most appropriate valuation
model from a group of individual AVMs.** The data is filtered to include only
properties valued between $30,000 and $30 million because AVM accuracy tends
to quickly worsen outside of this value range, which could yield either overly
pessimistic or overly optimistic equity estimates.
The amount of equity for each property is determined by subtracting the
estimated current value of the property from the mortgage debt outstanding. If
the mortgage debt is greater than the estimated value, then the property is
determined to be in a negative equity position. The data is first generated at
the property level and aggregated to higher levels of geography.
*Only data for mortgaged residential properties that have an AVM value is
presented. There are several states where the public record, AVM or mortgage
coverage is thin. Although coverage is thin, these states account for fewer
than 5 percent of the total population of the U.S.
**Beginning Q1 2012, the modeling methodology used to estimate market value
was enhanced by introducing the CoreLogic GeoAVM Core Cascade. This cascade
optimally selects the most appropriate AVM to predict current market value and
is calibrated to market sales activity on a quarterly basis. The "cascading"
approach helps achieve greater valuation accuracy, increasing the resulting
precision of negative equity estimates. CoreLogic has revised the entire
negative equity time series to reflect the adoption of the new methodology.
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billion records spanning more than 40 years, providing detailed coverage of
property, mortgages and other encumbrances, consumer credit, tenancy,
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