According to a report released today by real estate data analysis firm CoreLogic, 36% of Michigan homeowners with a second mortgage are underwater. Michigan fares slightly better than the rest of the country, where 38% of second-mortgage borrowers are underwater. Nevada, at 63%, has the highest rate of negative equity.
Adding to their troubles, underwater homeowners seeking a short sale—selling a property for less than the value of the outstanding mortgages—have a much harder time doing so when they have a second mortgage, because all the lenders involved must agree to take losses on the sale, and second-in-priority holders take the first losses in such a situation. For these reasons, and with home prices nationwide continuing to tumble, new home-equity loans are almost nonexistent.
Source: The Wall Street Journal