Connecticut sees sharp drop in mortgages deemed ‘severely submerged’

Heading into the summer, Connecticut had one of the steepest declines in the nation for mortgages classified as “severe water scarcity.” These are homes where the homeowner has a loan that exceeds the market value of the home by 25% or more.

This could result in losses on attempted sales and could encourage mortgage lenders to move more aggressively in foreclosure scenarios if homeowners are struggling to keep up with payments. there is.

Connecticut’s real estate market remains hot by historical standards given the high home prices and speed of home sales. But the Federal Reserve has hiked interest rates significantly this year, making mortgages more expensive for home buyers and those facing rising interest rates on variable-rate mortgages.

In the second quarter, 3.3% of existing Connecticut homeowners had a serious mortgage, down from 4% just three months ago, according to Attom Data Solutions. Connecticut is still ahead of her national average of 2.9%, but it’s trending in the opposite direction from neighboring New York and New Jersey, both of which saw their underwater mortgage rates rise in the second quarter.

But Connecticut missed cuts in the top states for “equity-rich” mortgages — those in which the borrower borrows less than half the home’s value for the remaining loan balance. July marked a new high, with 48.1% of mortgages classified as equity-rich by Attom.

Analysts at Attom noted that conditions for Underwater Mortgages are improving as mortgage values ​​have risen since the start of the COVID-19 pandemic.

“Although home price gains appear to be slowing due to higher mortgage rates, homeowners are likely to continue amassing record wealth for the remainder of 2022.” said Executive Vice President Rick Sharga. Attom’s market information is described in written comments accompanying Attom’s reports.

On Thursday, mortgage guarantor Freddie Mac reported that average U.S. mortgage rates rose for a second week in a row and fell below 5% for the first time since April.

Connecticut home sales fell 16% in the first half of the year, a result of a comparable decline in real estate for sale. William Pitt Sotheby’s International Realty reported this week that the number of new listings in July in five counties in Connecticut tracked by the company fell 18% to 25%. did.

A Stanford-based brokerage firm said in a July report, “New York City residents are still seeking historic numbers of suburban homes, and buyer demand continues to be strong, if not as high as in recent quarters. “Economic turmoil has played a role in declining sales, but the proximity to New York City still keeps the market active.”

This sustained buyer interest provides a relief valve for Connecticut homeowners who need to sell for financial or other life reasons. Connecticut had about 1 in 775 mortgages in the first half of this year, making him the 11th-highest rate of foreclosure filings nationwide, according to Attom.

Under Connecticut law, the lender must enter into formal mediation with the borrower to come up with a payment plan to replace the foreclosure.

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