Faithful mortgage payments may hobble U.S. economy
WASHINGTON -- For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.
But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It`s not that these homeowners will stop making their payments. It`s just the opposite -- that they will keep doing it.
How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending -- a drag on family finances, the housing market and the overall economy.
And the drag could persist for years.
Of the estimated 15 million homeowners underwater, about 7.8 million owed at least 25 percent more than their properties were worth in the first quarter of this year, according to Moody`s Analytics` calculations of Equifax credit records and government data.
More than 4 million borrowers, including 672,000 in California, 424,000 in Florida and 121,000 in Illinois -- three of the biggest real estate markets -- were underwater more than 50 percent. Their average negative equity: a whopping $107,000.
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