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Report: Many Americans used homes as ATMs

The shadow of a house key falls over a mortgage application form.

BOB MOON: We have long known -- all too well -- that all those second-mortgages on homes have hurt a lot of us. Now we have an idea how bad it really is: A new survey finds 38 percent of homeowners who tapped their home equity with a loan are underwater on those second-mortgages. Only 18 percent with just a single mortgage owe more than their house is worth.

For more on this, let's turn to Anthony Sanders, a professor of real estate finance at Virginia's George Mason University. Good morning!

ANTHONY SANDERS: Well, thanks for having me.

MOON: Does this data prove the phrase that we've heard a lot that Americans used their houses as ATMs?

SANDERS: Yes. It does. But we knew this was happening. We just didn't know the magnitude of it until fairly recently.

MOON: Is it worrisome? Are homeowners with second mortgages more likely to say, walk away from their houses than those with just one mortgage?

SANDERS: Once you -- for example, if you put 20 percent down on your home, housing prices go up 10 percent and you go out and get a second mortgage or a Heloc, suddenly you have an enormous amount of spending ability. You get to go out and you know, buy that new Ford F150 or get a big screen TV. And then suddenly housing prices fall down. You're now so lover leveraged. So that's the situation we're in today. And is going to lead to higher default rates.

MOON: Has the situation changed? Has the number of new second mortgages dropped since the housing bubble?

SANDERS: Credit has tightened up very hard. Second mortgages are very difficult to get relative to how they were. But the problem is we still have this big, back log of first loans with second mortgages behind them that are going into default. So there's still this wave of foreclosures still to come which is going to drive down house prices even further.

MOON: Anthony Sanders is a professor real estate finance at George Mason University. Thanks for your insights.

SANDERS: Oh, thank you very much for having me.

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