Excerpted from “Underwater Need Not Mean Foreclosure,” by Karen Blumenthal, on WSN.com:
What does being “underwater” in your house really mean? Probably not that you’re drowning.
The number of underwater homeowners — those who owe more on their mortgages than their home is now worth — has been growing sharply since 2006 as real-estate prices have tumbled. By some estimates, between one in six and one in eight homeowners are in that position, most of them people who bought homes in the past few years or who put down small or no down payments.
This worries economists and policy makers, since owing more than your home is worth is the first step toward foreclosure. And it’s a concern to the rest of us because foreclosures are roiling the financial markets and, closer to home, they drag down our neighborhoods. (Most people who still have equity, by contrast, would rather sell their houses at a loss than lose what’s left of their investment.)
In response to concerns about rising foreclosure and delinquency rates, federal regulators are studying possible new programs aimed at needy homeowners…