Negative Equity Rate Down to One in 10

In Black Knight Financial Services’ latest Mortgage Monitor Report, the company found that only one in ten Americans are underwater, down from one in three as recently as 2010.

Overall, the company’s look at March data reflected a shifting landscape. As home prices have risen over the past two years, many distressed loans have worked their way through the system, and the percentage of Americans with negative equity has declined considerably.

"Two years of relatively consecutive home price increases and a general decline in the number of distressed loans have contributed to a decreasing number of underwater borrowers," said Kostya Gradushy, Black Knight's manager of Loan Data and Customer Analytics.

"Looking at current combined loan-to-value (CLTV), we see that while four years ago 34 percent of borrowers were in negative equity positions, today that number has dropped to just about 10 percent of active mortgage loans," he added.

Gradushy references the 10.1 percent negative equity average, but which states homeowners reside in paint a clearer picture of negative equity across the spectrum. Judicial foreclosure states have a higher negative equity rate at 13.4 percent, compared to the 7.9 percent rate experienced in non-judicial states.

Regardless, Gradushy notes that both judicial and non-judicial states have experienced declines. "Overall, nearly half of all borrowers today are both in positive equity positions and of strong credit quality—credit scores of 700 or above. Four years ago, that category of borrowers represented over a third of active mortgages," Gradushy said.

Black Knight had more positive news in its Mortage Monitor Report: Leading indicators, such as foreclosure starts, new problem loan percentage, 90-day defaults count, and 30 to 60 roll count were all down heading into the second quarter.

The company offered that the 2013 population of loans was "the best vintage on record," but the statement belies the fact that higher credit restrictions severely hampered new originations for lower credit borrowers.