LOS ANGELES COUNTY MORTGAGES LOS ANGELES COUNTY MORTGAGES ARE ‘SERIOUSLY’ UNDERWATER ARE ‘SERIOUSLY’ UNDERWATER BRIANA FRAZIER Attom Data Solutions reports that about 1.9% of the Los Angeles county mortgages are “seriously underwater” at year’s end despite a healthy economy and a booming real estate market. In the last quarter of 2019, LA county had 29,871 underwater homes. To arrive at this figure, Attom tracked what it perceives as the most troublesome home loans; mortgages that are 25% greater than the value of the home. While this figure seems like a lot of troubled home loans, data shows that the county’s share of seriously underwater mortgages was sixthlowest among the 50 populated U.S. Counties. An underwater mortgage refers to a home purchase loan with a higher principal than the free-market value of the home. It is a situation that normally occurs when the value of the property is falling. In this situation, the homeowner may not have an equity available fo the credit, which in most cases limits the homeowners from seeking options like refinancing or selling the home unless they have the cash to pay the loss out of pocket. Underwater mortgages were a common problem for most homeowners at the height of the financial crisis of 2007-08, which among other things involved a substantial deflation in the housing prices. While the market has recovered, partly due to the support from the 70
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monetary policy and interest rate stabilization, the underwater mortgage still remains a factor that property owners must follow closely when making real estate investments. If the economy sours, or if the homeowner’s finances are stretched, there is very little financial motivation keeping the borrower in these homes. The challenges that we mainly see in the underwater statistics highlight the lingering value issues from the financial crisis as well as the more recently reduced values of the high-end housing. In the last quarter of 2019, California’s total recorded seriously underwater homes were 189,896. Which means 2.7% of all mortgaged properties, third-lowest nationwide. By Attom’s Data calculations, 7% of mortgages in the rest of the U.S. are seriously underwater. At the neighborhood level in LA county, the pricier the community the more likely the higher chances of seriously underwater homes. Shortages of affordable residences have kept the low-end prices stronger than the bulk of the market. In addition, cheaper homes are often bought with large downpayments o in all-cash deals creating high levels of equity. The following is a list of numbers and share of seriously underwater mortgages in 238 big LA County ZIP codes and how the percentage is ranked among 979 California ZIPs tracked by Attom THE POWER IS NOW MAGAZINE | MARCH 2020
