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33 » VISIT US ONLINE @ DSNEWS.COM UNDERWATER MORTGAGE BORROWERS STRUGGLE TO COME UP FOR AIR Negative equity is down to 13.1 percent nationwide, but is still a nagging problem choking real growth and limiting new inventory, according to a new report by Zillow. e report found that six million homeowners were underwater in Q 4 of 2015. And while that number is still a problem, it is significantly lower than the peak 16 million underwater homeowners that existed in Q1 of 2012, and the 8 million underwater homeowners of a year ago. According to Zillow, the millions of underwater homeowners who have resurfaced over the past year have led to a $75 billion decline in negative equity, which has helped keep the U.S. housing market jogging along steadily. But while the overall picture is vastly improved from even just a year or two ago, there are still 820,000 homeowners who owe more than twice as much on their mortgages as their homes are worth. "Some owners are so far underwater that positive equity may be several years away, leaving them stuck in their homes unable to sell," the report stated. Las Vegas and Chicago have remained especially hard hit. According to Zillow, a fifth of all homeowners in these cities remain underwater. Atlanta, Baltimore, and Cleveland still have 17 percent of buyers upside down on their mortgages. In contrast, San Jose has the lowest number of underwater homeowners, with 2.8 percent. Its closest competitor is across the Bay in San Francisco, where 4.4 percent of homeowners are upside down. Denver and Portland, Oregon, each have about 5.5 percent underwater homeowners. Svenja Gudell, Zillow's chief economist, said that the effects of this nagging negative equity on the overall housing market could be subtle but serious. "Over time, negative equity can act as an anchor on a housing market, preventing underwater homeowners from listing their homes and reentering the market," Gudell said. "It is more prevalent in less expensive areas that are affordable to first-time buyers. Without these homes available, many potential buyers are sidelined and unable to take advantage of MORTGAGE DELINQUENCIES EXPERIENCE ATYPICAL SPIKE Most of the news regarding housing fundamentals has been positive in the last two years or so. But mortgage delinquencies rose month-over-month in January for the first time since the housing recovery began, according to data reported by Black Knight Financial Services. According to the January 2016 Black Knight Mortgage Monitor, the share of delinquent mortgage loans (30 days or more overdue but not in foreclosure) has declined by an average of 2 percent month-over-month every January since 2011—until this year. In January 2016, the share of delinquencies shot up by 6.6 percent, an increase of 167,000 properties, according to Black Knight. With January's increase, the total of delinquent properties nationwide was approximately 2.57 million, or about 5.1 percent of all residential properties with a mortgage, Black Knight reported. Will delinquencies bounce back in February? Possibly, according to Black Knight. "It is typical to see a partial, but not full, recovery the following month," the report stated. e fact that January ended on a Sunday contributed to the increase in delinquencies because servicers are unable to process any payments made on the last two days of the month. According to Black Knight, the five largest over-the-month increases in the last three years have all come in months that ended on a Sunday. e roll rates, or loans rolling into a more delinquent status, increased across all categories in January, with the more pronounced increase occurring in the early-stage delinquencies. e number of borrowers who became 30-days delinquent in January totaled 580,000, which was a 28 percent increase (129,000 loans) from the previous month. Loans that rolled from 30- to 60-days delinquent increased by 11 percent in January, while the number of loans that rolled from 60- to 90-days delinquent rose by 7 percent. e share of loans that rolled from 90 days delinquent to foreclosure declined from December to January, since the Sunday month- end had no impact. e combination of the increased roll rates with a drop in loan cures, or those loans that rolled from delinquent status to current), contributed to January's rise in delinquency rate. e decline in loan cures was also due to January ending on Sunday, according to Black Knight. As was the case with delinquencies, the drop in cures was more pronounced among loans in earlier stages of delinquency. Loans that were 1 to 2 months delinquent experienced a 20 percent decline from December to January, while loans that were 3 to 5 months delinquent experienced a decline in cures of 9 percent. For loans that were 6 or more months delinquent, the decline in cures was 13 percent. e number of loans that cured from active foreclosure also declined by 9 percent from December to January. Foreclosure starts totaled 84,300 for the month of February 2016, which was a 17 percent increase over- the-month and a 9 percent hike year-over-year. The increase was largely driven by repeat foreclosures in three states: New York, New Jersey, and Massachusetts, according to Black Knight Financial Services. KNOW THIS

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