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Black Knight Examines Scope of Underwater Loan Rescue

In its current edition of its monthly Mortgage Monitor report Black Knight
Financial services takes a new look at data on underwater delinquent borrowers.  The company said this was prompted by a
recent Senate Banking Committee hearing that looked at the possibility of
writing down mortgage principal balances to assist those borrowers.  Trey Barnes, Black Knights senior vice president of Loan Data Products, estimated some
4 million borrowers are underwater, that is owe more on their mortgages than
the market value of their homes, and have nearly $800 billion in outstanding
balances.

Even
in an environment of rising prices, these negative equity borrowers are ten
times more likely to fall into delinquency
than those with positive
equity.  There is a 40 percent aggregate
delinquency rate among borrowers with current combined loan-to-value (CLTV)
rations above 100 percent compared to 4.0 percent delinquencies for positive
equity loans.  Three out of four severely
underwater borrowers, those with a CLTV of 150 percent or more, are delinquent.

 

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