Underwater Mortgage Insurance, Because Negative Equity is Becoming Widespread

Adrienne Minor

[housing decline graph]

Underwater Mortgage Insurance, Because Negative Equity is Becoming Widespread (CNBC)

Over 20% of all homeowners with a mortgage still owe more money in their mortgage than their homes are currently worth. These “underwater” mortgage holders, as well as those who have accumulated less than twenty percent equity in their homes, are effectively prevented from buying a new home without first experiencing a short sale or foreclosure. AmTrust Financial Services will be offering an insurance product to homeowners where its agents will sell the home and pay the homeowner the difference between the home’s current price and the mortgage. Not everyone believes this service is truly useful.  “Consumers who have an extra $40 or $50 per month can ‘self-insure’ against house price declines by paying down their mortgage principal faster,” said Barry Zigas, director of housing for the Consumer Federation of America. “This generates further equity and is an investment, not an expense for insurance that may never be recouped.”

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