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.

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Yeah, 20% drop is pretty generous. Most homes here are 50% less than they were 5 years ago.

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I'm not shocked. The condo project I lived in has dropped 50% since it was completed

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No surprise, here. I thought it would be more than 25% underwater. I dont think the ARM loans have anything to do with it. Most of those came to term 2 years ago, and many of those borrowers foreclosed or refinanced. I do not think banks would still be offering them today.

Most of the underwater mortgages are due to the decline in home prices. I bought my home in 2006 right after Hurricane Katrina, and prices were slightly inflated do to the influx of new buyers to the area. Refinacned last year at an extremely low interest rate. If I sold my home today, I would do so at a loss.

I agree. Most of the ARMs have be dealt with already. Those with conventional mortgages are suffering from the market taking a dump. I don't think I know anyone who's house is not under water to some extent. Even a friend who bought something recently at 50% less than the high point got an assessment at a lower value than he bought it at and he bought it as a foreclosure at a steal.

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Not surprising in the least. The most recent figures I have read say roughly 81% of mortgages are under water in the Las Vegas area. This article is a month old and shows ~71% but the proportion has gone up. Scary numbers no matter how you look at them.

USA Today notes Las Vegas' underwater housing problem - Tuesday, Feb. 8, 2011 | 9:32 p.m. - Las Vegas Sun

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