"For many, the home has morphed from piggy bank to albatross,"

[I AM NOT THAT GUY 5,715]

About half of U.S. mortgages seen underwater by 2011

NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29 percent, it said.

"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.

Deutsche's dire assessment comes amid a bolt of evidence in recent months that point to stabilization in the U.S. housing market after three years of price drops. This week, the National Association of Realtors said pending home sales rose for a fifth straight month in June. A widely watched index released in July showed home prices in May rose for the first time since 2006.

Covering 100 U.S. metropolitan areas, Deutsche Bank in June forecast home prices would fall 14 percent through the first quarter of 2011, for a total drop of 41.7 percent.

The drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough.

Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were "affordability products" originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,

Of option adjustable-rate mortgages -- which cut payments by allowing principal balances to rise -- 89 percent will be underwater in 2011, up from 77 percent, the report said.

Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.

"For many, the home has morphed from piggy bank to albatross," the analysts said.

http://news.yahoo.com/s/nm/20090805/bs_nm/...ng_deutschebank

Edited August 6, 2009 by Mister_Bill

[_Simpson_ 250]

I bought mine right when the housing market was peaking, I thought I need to get on this train before it comes to a point were I wont be able to afford to buy my own home. "Momma always said life was like a box of chocolates. You never know what you're gonna get."

[I AM NOT THAT GUY 5,715]

I lucked out buying my house in 1988. I will have it paid off next year. I know I would have a hard time buying, even in this market.

[Niels Bohr 72]

Heck, I luck out buying a house that is 100,000 for three family unit. Have it paid off in approximately 5 years! Planning on buying two more! When they have the rail built near here, the property value will skyrocket! When I retire, I'll sell it off.

[_Simpson_ 250]

I lucked out buying my house in 1988. I will have it paid off next year. I know I would have a hard time buying, even in this market.

I wish I was in your shoes. In 27yrs I will have my paid off.

[w¡n9Nµ7 §£@¥€r 123]

I bought in the summer of 03, six years ago. I rushed into it too, not wanting to be "priced out forever".

Today, my home would sell for no more than 10% over what I paid for it in 03. That's pretty weak, even by my standards.

Had I not bought then and continued to accumulate downpayment cash while I rent, I'd be in position today to get into something much nicer.

So yeah, albatross is right :-)

Edited August 10, 2009 by w¡n9Nµ7 §£@¥€r

[_Simpson_ 250]

I bought in the summer of 03, six years ago. I rushed into it too, not wanting to be "priced out forever".

Today, my home would sell for no more than 10% over what I paid for it in 03. That's pretty weak, even by my standards.

Had I not bought then and continued to accumulate downpayment cash while I rent, I'd be in position today to get into something much nicer.

So yeah, albatross is right :-)

perfect way to put it, dito.

[w¡n9Nµ7 §£@¥€r 123]

In hindsight, what a totally retarded thing to fear.

[_Simpson_ 250]

In hindsight, what a totally retarded thing to fear.

Word!

Edited August 10, 2009 by looking_up

[I AM NOT THAT GUY 5,715]

So, I gets a letter from GMAC today: (Bold is theirs, [ ] is mine)

We are committed to helping....doing everything we can to help ensure you do not borrow more against your home than it may be worth...home values in many areas are falling...we have re-assessed your home equity...using an automated valuation method (AVM).

This value no longer supports the full amount of your line of credit; therefore, it is necessary to suspend your remaining credit line availability immeadiately.

...You may dispute......provide an appraisal...from one of the [two] approved appraisal companies below..

...Additionally, within 15 days from the date of this letter, please submit current evidence of income...

...We understand you have handled your home equity account responsibly....

So, I called them, and said, "#######!'

They said, "Just read the terms of the letter and follow the instructions."

"Really, well I guess you don't want to do bussiness anymore." (Hang up.)

It's all total B.S. I have an 800 plus credit score last time I checked with all three rating services. It's a $40K line of credit, with a balance of $5K, and $12K left on the first mortgage. Even if what they said was true, that home values have declined by 50% in the area, and that may be true, that still leaves me with over $140K in equity. (Last appraisal was $330K). I have no other debts.

GMAC has been a great company to deal with up to this point. This tells me something is happening with them, that something is forcing a complete tightening of credit, because my little line of credit is not hurting their bottom line. Maybe they just want a chance to renegociate the loan tems. Not likely, on my part. I think I will minimum pay that loan for a while. It's at 3.25% annual right now, and keep paying down the first. Buttwads!

Edited August 11, 2009 by Mister_Bill