Homeowners with home equity loans are more than twice as likely to be "underwater" as those who didn’t take cash out of their homes, according to statistics compiled by real estate and loan data aggregator CoreLogic.
CoreLogic estimates that at the end of March, 22.7 percent of homeowners with mortgages — about 10.9 million borrowers — owed more on their mortgage than their home was worth. That’s down slightly from an estimated 11.1 million underwater borrowers at the end of December.
Falling home prices can put borrowers who have little equity in their homes underwater. By allowing homeowners to convert equity they have in their homes into cash, home equity loans reduce the cushion borrowers have against price declines.
CoreLogic said that 38 percent of borrowers with home equity loans were underwater at the end of March, compared with 18 percent of homeowners who had no home equity loan. More than 40 percent of all underwater homeowners (4.5 million) have home equity loans, CoreLogic said.