Despite record low mortgage rates, the number of Americans requesting quotes for refinancing home loans has also hit bottom. Veteran mortgage brokers have been reluctant to ramp up for seasonal lending tied to winter tax planning and holiday spending, especially since few homeowners have enough equity to make a cash-out refinance worth the effort.
Interest sunk by valuations
CoreLogic, a housing data tracking specialist, estimates that more than 22 percent of all mortgaged homes in the United States remain in negative equity status. That means one in five Americans who pay mortgages technically owe more money on their home loans than their properties are worth. In a healthy economy, CoreLogic officials contend, only about five percent of homeowners would be "underwater."
The problem gets even worse in states where homeowners took big risks on high-flying property values. Few property gambles paid off in Nevada, where CoreLogic estimates that two out of three mortgages are underwater. Arizona, Florida, Michigan, and California round out the list of states with the most properties at risk of sinking under the weight of negative equity.
Move-up market key
Economists note that economic growth depends on help from the "move-up market," a term that real estate agents and mortgage brokers use to describe homeowners moving from starter homes to larger properties. Depreciation in most property markets has locked homeowners into their current locations, without the ability to convert home equity into down payments for larger mortgages.
Although the percentage of underwater borrowers dropped over the past few months, CoreLogic data suggests that the figure changed more because of an increase in foreclosures instead of a bump in home prices. Real estate agents' biggest hope, therefore, has become the opportunity for long-time renters to finally afford mortgage loans on reduced-rate, recently-foreclosed properties.
Steps to take now
If you're underwater on your own mortgage loan, but you're having no problems making your monthly payments, you're in better shape than you probably feel. You may even want to speak to your mortgage lender about a mortgage loan modification that takes your income, your savings, and your overall credit into account. Families planning to remain in their current homes for fifteen years or more can enjoy outstanding long-term benefits from a mortgage refinance or a modification into a fifteen year, fixed rate mortgage at today's mortgage rates. Tightening the budget belt now, even when underwater, can result in significant savings on finance charges over the life of a mortgage loan.