One in Six American Homeowners in Upside Down Mortgage

The number of U.S. homeowners that are “upside down” in their mortgages has quadrupled in the past two years, according to a recent report from Moody’s

Of the 75.5 million homeowners across the nation, about 12 million of them now owe more on their mortgages than their homes are worth, a situation that is also known as negative amortization. That means that roughly 12 percent, or one in six, of all homeowners have a mortgage balance greater than the value of their property.

By comparison, only 4 percent of borrowers were upside down in their mortgages in 2006 and 6 percent had negative equity by 2007.

And among those who bought a home in the past five years, the distinction is even more pronounced; approximately 29 percent in that category are “under water” on their home loans, according to the real estate website This statistic is likely due to the fact that home prices reached their highest point during the past five years and mortgage lending standards were also at their loosest.

Home prices have made a steady decline since their peak in mid-2006, falling 13 percent to the current national median price of $203,000. That represents a more affordable price-to-income ratio, at 1.9 times the average pre-tax income, compared with prices that were 1.87 times the average income during the period of 1985 to 2000.

And while the number of people in mortgages with negative amortization is growing, the majority of homeowners, about 64 million, still have some equity in their home, with more than 24 million owning their homes completely, with no remaining mortgage balance.

Still, defaults and foreclosures are on the rise, and it can  be very difficult for those who have no equity and are way behind on their payments to hold on to their homes. The foreclosure crisis may continue to deepen as struggling homeowners face falling home values and fewer available mortgage lending resources.

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