Borrowers sink further underwater

The Fitch Ratings report on U.S. prime mortgages found the weak housing market is pushing more borrowers underwater as prices and equity drop. The report found more than one third of all prime borrowers are in a negative equity position, or underwater on their mortgages.

Managing Director of Fitch, Grant Bailey, said home prices have not yet hit bottom and will likely decline another 10 percent. This will push about half of prime borrowers underwater on their mortgages. The delinquency rate for prime borrowers is currently more than 12 percent, prompting Bailey to predict mortgage default rates will remain elevated until home prices stabilize and unemployment decreases.

With experts predicting the housing market has yet to hit bottom, The National Association of Home Builders reported the Federal Reserve Chairman Ben Bernanke has been leading the campaign to push lawmakers in Washington to address the flailing market.

Bob Nielsen, chairman of the NAHB, said federal policymakers need to reverse anti-housing policies that are preventing a housing and economic recovery from taking place.

"National unemployment flatlined in August, more than 1.4 million residential construction jobs have been lost since April 2006 and yet there is demand for housing in markets that are on the mend," said Nielsen. "Home builders have plenty of shovel-ready jobs set to go but they can't keep their doors open and create jobs in their communities if federal regulators continue to shut off the credit spigot."

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