What is Negative Equity?
While the government has launched efforts to stem foreclosures, those moves are not yet reflected in data, Carson said. Banks are also trying to work with consumers to reduce problematic mortgages, but falling home prices are feeding the problem, he said. “We do know from everything we’ve found out in the last year is that the primary driver on mortgage defaults is negative equity,” he said.
When homeowners owe more on their mortgages than the houses are worth, data show a higher likelihood that consumers will simply walk away, he said. These consumers have upside down mortgages or negative equity and there for feel like they have no hope. If they only did just a little more research they would find that they could easily make changes to their mortgage if they put in the effort.