Although the foreclosure crisis is making far less headlines than it once did, it is still a big problem in America.
In fact, underwater mortgages are back to 2011 levels, currently at 11 million homes or 22.8% of all residential mortgages.
For those 11 million homeowners, an underwater mortgage represents an impossible financial situation to rectify because homeowners can’t sell their home but also can’t afford the payments and for most, it will likely be many years, at least, before they see the value of their home return if they see it at all in their lifetime.
When a homeowner can’t meet their mortgage obligation, the bank or mortgage lender holding the loan suffers because the bank still has to make the payment to the investors holding the loan. These toxic loans aren’t draining the balance sheets of these large banks but it does affect profitability and that’s bad for business at a time when banks have underperformed the stock market since 2009.
For four years, banks have tried to get these bad loans off their books.