March 16th, 2014 11:37 AM by Sam Kader
Negative equity seems to be declining nationwide. About 43 million homeowners now have positive equity while about 6.5 million are still negative equity. Homeowners equity rose by $2.1 trillion last year to $10 trillion. Positive equity makes it easier for homeowners to refinance and to sell their properties. California leads the pack with about 12.5% still underwater (13.3% nationwide) while Nevada tops the chart with 30.4% still underwater. Equity of less than 20% is considered "under-equitied" which is still better than negative equity but not as good as 20% equity. Call us if you in the "Under-Equtied" category for refinancing programs available for you. However, there is a flip side to the story. Homeowners are frustrated due to their inability to tap their home equity. Despite low interest rates, it's become harder to borrow. Banks are requiring pristine credit since the great recession of 2008. Banks must now hold more money in reserve for each home-equity credit line they extend. So home-equity lines have become a less attractive business for banks than loans that require lower reserves. Fannie Mae and Freddie Mac can now send home loans that default back to the banks that provided them inflicting losses on the banks. Fannie and Freddie also view cash-out refinancing as riskier now and have imposed higher fees to guarantee them. This makes such loans costlier for banks and consumers. Banks are increasingly focusing on the most credit worthy borrowers requiring an average credit score of 780 to get a home equity loan (barely 30% of households have scores that high).