Report finds more than 20 percent of mortgages are underwater

A recent report from CoreLogic found 10.7 million people have underwater mortgages in the third quarter of 2011, down from 10.9 million in the second quarter. In regards to residential properties, 22.1 percent of all homeowners are in negative equity with their mortgages, and 12 states have more than 20 percent of its mortgages underwater.

In addition, 2.4 million homeowners have less than 5 percent equity, making them near negative equity and indicating the underwater mortgage count could increase in the fourth quarter. Total, negative equity and near negative equity home loans make up 27.1 percent of all residential mortgages in the country for the third quarter, down from 27.5 percent in the second quarter.

“Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness," said Mark Fleming, chief economist at CoreLogic. "The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy.”

The federal housing programs to help more homeowners refinance to avoid foreclosure are struggling to gain momentum with private lenders. The Palm Beach Post reported Bank of America, which owns up to 20 percent of the nation's home loans, is no longer accepting applications for the refinance program, as changes needed to be made to accomodate for the program.

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