Not surprising. I would venture to say that many of them are in Adjustable Rate Mortgages. Its pretty crazy because you can actually have negative amortization.. So often their remaining balance does not only not get smaller after a payment..it actually gets larger. Also, think about the way amortization in general works out--you are paying mostly interest for the first half of the loan, your principle loan amount is barely changing.
So many people got into these mortgages that they couldnt afford.
Take for example a 30 year mortgage, 500,000 at 5% interest rate. Lets say that they got into this about 5 years ago..
Monthy payment: $2,684.11
After 5 years of paying, their loan amount left is $459,143.66
They have paid $40,856.34 in principle and $120,190.15 in interest over those five years.
Now lets assume that the housing market dropped 20% in the past 5 years (this is pretty generous..), their mortgage (or house) is only worth $400,000.. so under water by almost 60k. pretty scary stuff.
If you couldnt tell, i just finished studying for my real estate finance test.
