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THURSDAY, NOVEMBER 26, 2009
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1 in 5 Homeowners Underwater

Negative equity spikes to 21.9% as prices keep dropping

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(Newser) – More than one in five American homeowners owe more on their mortgages than their homes are worth, according to a new study. The increase in negative equity has been accompanied by new signs that first-time buyers are taking advantage of lower prices in the housing market. But as prices continue to fall, homeowners who face trouble can struggle to refinance or sell their homes, reports the Wall Street Journal.

The jump in "underwater" homeowners, to 21.9%, poses yet another challenge to the Obama administration's efforts to stabilize the housing market. In February the government unveiled a plan to let homeowners with loans guaranteed by Fannie and Freddie refinance, but only if the loan is at maximum 105% of the house's value. With rising negative equity, officials said they may increase that limit.

Real estate ads in Detroit, Thursday, Feb. 26, 2009. Foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.
Real estate ads in Detroit, Thursday, Feb. 26, 2009. Foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.   (AP Photo/Carlos Osorio)
A foreclosure sign sits on top of a sale placard outside a home on the market in the south Denver suburb of Littleton, Colo., on Tuesday, Dec. 23, 2008.
A foreclosure sign sits on top of a sale placard outside a home on the market in the south Denver suburb of Littleton, Colo., on Tuesday, Dec. 23, 2008.   (AP Photo/David Zalubowski)
In this July 13, 2008 file photo, the Freddie Mac's corporate offices are seen in McLean, Va.
In this July 13, 2008 file photo, the Freddie Mac's corporate offices are seen in McLean, Va.   (AP Photo/Pablo Martinez Monsivais, FILE)
In this Feb. 23, 2009 file photo,a foreclosure sign blows in the wind in front of a home under foreclosure in Antioch, Calif.
In this Feb. 23, 2009 file photo,a foreclosure sign blows in the wind in front of a home under foreclosure in Antioch, Calif.   (AP Photo/Paul Sakuma)
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Reader2795
May 6, 09 11:10 AM CDT
Add to this the fact, with the price fall, and the systematic reduction by Credit reporting agencies of FICO scores, and unemployment many will struggle even more to refinance unless regulatory agencies step in to force refinance to affordable modifications. Reply
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