WASHINGTON – Just under half of all Arizona mortgages were “under water” in spring of this year, the second-highest percentage in the nation, according to a report from a private research firm.
CoreLogic said only Nevada, at 63 percent, had a higher rate of homes under water at the end of the first fiscal quarter of 2011, the most recent period for which it had a report.
An underwater mortgage is a home with negative equity — when a person owes more on their mortgage than their home is worth.
Arizona homeowners who were under water averaged $60,000 in negative equity, according to the report, below the national average of $65,000. New York borrowers held the highest negative equity with an average of $120,000, but only 6.2 percent of mortgages in that state were under water.
Phoenix was the third-highest metro area in the nation, with 55 percent of its mortgages under water, according to CoreLogic, trailing Las Vegas and Stockton, Calif.
Bankers in Arizona said they sense that foreclosures are starting to slow down, as the market attempts to stabilize.
“We may be bottoming out here,” said Paul Hickman, president of the Arizona Association of Bankers.
Large surpluses of housing are still keeping both housing and banking in gridlock. But experts don’t believe the situation can get worse than it is right now.
Hickman said the banks are trying to avoid foreclosures, if only to avoid having to pay to maintain them — a cost that can grow exponentially with about 100,000 foreclosed homes in the state.
“Foreclosures are flattening, they are not putting all that inventory on top of current inventory,” Hickman said.
But state housing officials say that requests remain high from people seeking helpwith their mortgage payments.
“We have been seeing a lot of activity,” said Shaun Rieve, spokesman for the Arizona Department of Housing.
Rieve said that the department got more than $267 million from a federal program that targeted states with the biggest losses in the sub-prime mortgage crisis of 2008. The Principal Reduction Program could allocate up to $50,000 toward a homeowner’s principal if the lender matched that amount, up to 31 percent of the mortgage, according to the state housing department.
But Rieve said few big lenders came on board with matching funds. He said Bank of America was one of the few to come on board, while the state “can’t get Chase (Bank) or Fannie (Mae) and Freddie (Mac)” to sign on.
The department has since redirected $36 million to an unemployment assistance fund that pays up to $2,000 a month in mortgage to unemployed homeowners who meet other requirements. The new program has been far more successful, he said.
Lenders said they are also offering loan modification programs and financial counseling programs to assist borrowers with underwater mortgages.
Chase spokeswoman Mary Jane Rogers said the bank is opening more than 25 newhomeownership centers nationally in 2011. The bank already has two centers in Arizona, one in Phoenix and one in Tempe.
She said borrowers can come into these locations six days a week to meet with a Chase adviser to work on alternatives to walking away from their homes.
“We do not want to own people’s homes,” Rogers said.
Drowning in Debt?
The top 10 states for percentage of homes with mortgages that were “under water” at the end of the first fiscal quarter.
Nevada: 62.6 percent
Arizona: 49.6 percent
Florida: 46.1 percent
Michigan: 36.0 percent
California: 30.9 percent
Georgia: 30.4 percent
Idaho: 24.2 percent
Maryland: 23.8 percent
Virginia: 23.1 percent
Ohio: 21.9 percent
Source: CoreLogic Inc.