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Underwater mortgages rise to 28.6 percent in third quarter

The unique housing market that has gripped the country for the past few years have placed many Ohio residents in the historically unusual situation where they owe more on their homes than the property is worth in the marketplace. So-called "underwater" mortgage have increased across the country, according to recent data released by Zillow. The number of U.S. homes that were underwater on the mortgage jumped to 28.6 percent during the third quarter of this year.

Prior to the "robo-signing" fiasco that was uncovered in 2010, the number of homes that showed negative equity reportedly hovered around 21- to- 23 percent. In the second quarter of this year, the percentage of underwater mortgages sat at 26.8 percent. Experts say that homes that have negative equity are considered to be at a higher risk of future foreclosure. Underwater homeowners generally have a more difficult time refinancing the home, although the government has announced some relaxed rules on refinancing due to the housing market crisis. Negative equity can also complicate selling a home.

A number of U.S. cities that have been hit especially hard by the foreclosure crisis show that more than half of all homes with a mortgage in the city are underwater. In Ohio, Cleveland appears to be among the hardest hit cities for large metro areas. Data shows that roughly 41.5 percent of homeowners with mortgages have negative equity in Cleveland.

Experts say that some homeowners who are underwater on their mortgage choose to simply walk away from the home in what is commonly referred to as a "strategic default." However, it is important to note that a homeowner that allows the home to go to foreclosure may find the bank seeking a deficiency judgment, especially in cases where the amount owed on a home loan exceeds that current market value.

A bankruptcy petition in some cases can help a homeowner retain the home from foreclosure, and in other cases bankruptcy can help to avoid any deficiency judgment after foreclosure.

A Columbus, Ohio based company, Home Value Insurance, says only 52 percent of Americans consider homeownership as an aspect of the American dream. The survey says that 48 percent of Americans consider homeownership a nightmare.

However, Trulia conducted a similar survey earlier this fall that showed a stark difference in the results. That survey indicated that 70 percent of the survey respondents said homeownership is the dream, with only 21 percent disagreeing.

Source: MSNBC, "Nearly 29% of mortgaged homes underwater, report finds," Jane Hodges, Nov. 8, 2011

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