13% fewer 'underwater' homeowners in 1Q

Long Island had 27,853 homeowners who were "underwater" -- owing more on their mortgage than the home is worth -- in the first quarter of the year, a 13 percent drop from the previous quarter's 31,987, said mortgage data provider CoreLogic.

Of the mortgaged properties, 5.3 percent of borrowers owed more than their homes were worth, down from 6.1 percent in the preceding quarter. Another 1.8 percent, or 9,422 borrowers, were in danger of being underwater, a few less than the previous quarter's 9,434.

The numbers look a bit rosier only because many homeowners have lost the fight and are out of the picture, said chief economist John Lonski at Moody's Capital Markets Group: "You've eliminated the weakest through foreclosures. It's sort of a mortality type of tale here."

Nationwide, 22.7 percent had no equity or negative equity, down from the previous quarter's 23.1 percent, CoreLogic said. New York State led in the average gap between mortgage owed and property value -- $129,000 -- followed by other high-housing-cost states.

Those with home equity loans were at higher risk of being underwater, CoreLogic said. Of the borrowers without such loans, 18 percent were underwater by an average of $52,000; for those with home equity loans, the numbers were 38 percent and $83,000.

Local foreclosure prevention advocates said having a second loan on the house complicates negotiations because two lenders must agree on the deal.

Also, borrowers with home equity lines may be more likely to default, said Carol Yopp, foreclosure program manager at the nonprofit Long Island Housing Partnership, because they owe more.

More than 40 percent of underwater borrowers hold home equity loans, CoreLogic said.

Often, struggling borrowers pay the home equity loan bill instead of the heftier payments on the primary mortgage, but that's a mistake, Yopp said. It's the primary lender that holds the right to foreclose, she said.