One in 4 mortgage holders in Hampton Roads is 'underwater'

A quarter of all homes with mortgages in Hampton Roads are worth less than what is owed on the loans, according to a report released Tuesday.

The number of local home-owners who were "underwater" on their loans rose to 83,542 at the end of June, according to CoreLogic, a Santa Ana, Calif.-based company that tracks mortgages nationwide. The number is up 4.2 percent from the roughly 80,150 who were underwater at the end of March.

The firm's quarterly report forecast that 22,759 more mortgages in the region would be underwater if home prices declined 5 percent from current levels.

Economists and real estate experts say that owing more on a home than it is worth is one of the most common precursors to foreclosure.

The high number of local homeowners underwater in their mortgage could be attributed in part to the prevalence of loans backed by the Federal Housing Administration and the U.S. Department of Veterans Affairs, both of which offer low or zero down payments, said Vinod Agarwal, an economist at Old Dominion University.

"I'm not surprised that the numbers in this area are slightly higher than in other areas in the U.S.," he said. "We know housing prices have declined. So, if you put zero percent down, that means you are underwater."

For homeowners who aren't in jeopardy of falling behind on payments, being underwater means they are tied to their homes - unable to sell without paying their lender the difference or negotiating a short sale.

"The other thing, if you have negative equity, it becomes almost impossible to refinance and take advantage of the lower interest rates," Agarwal said. "You're sort of stuck."

CoreLogic uses public records to track local unpaid mortgage debt, which includes both first and second mortgages and lines of credit. The firm assumes that homeowners are paying their mortgages according to schedule.

CoreLogic also tracks home prices and uses that index to calculate the number of underwater loans. The company estimates that home prices in Hampton Roads have dropped 8 percent in the past year.

Homeowners who bought or refinanced at the peak of the housing boom were the most susceptible to finding themselves underwater as home values have fallen, eroding any equity the buyers had built up. Some new buyers also might find themselves underwater if they financed home purchases with little or no down payment.

The proportion of homeowners in Virginia who owe more than their homes are worth was 23.3 percent in June

, according to CoreLogic.

Across the country, the number of homeowners underwater remained flat at about 10.9 million in June, the firm reported. That represented about 22.5 percent of all residential properties with a mortgage nationwide.

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com