How Many Homeowners are Still Underwater?

While the rising home prices are a good sign for a recovering economy, there are still many homeowners underwater.

According to the Zillow Negative Equity Report, 31.4% of borrowers this quarter owe more on their home than it is worth, a statistic that is unprecedented.

The Zillow Negative Equity Report takes mortgage data from leading credit and information management firms to create their statistics. Some things that are included in the report are negative equity, loan-to-value ratios, and delinquency rates.

Negative equity is measured by estimating the value of a home matched to all outstanding mortgage debt and lines of credit associated with the home.

In previous years with high rates of underwater mortgages, homeowners would walk away from in order to avoid losing money in the long run. But in this quarter, most underwater homeowners appear to be current and sticking with their mortgage.

The highest negative equity rates can be found in the states that were hit the most dramatically by the housing recession. Typically, as home values fall, negative equity increases.

One in two houses in many metros in the United States (Las Vegas, Phoenix, Atlanta, Orlando and Riverside) are underwater, according to the Zillow report.

There is some good news for underwater homeowers as HARP 2.0 refinance guidelines removed the maximum loan-to-value limit for refi plus loans. Meaning, borrowers may be able to refinance to lower interest rates no matter how upside down they are as long as they meet all of the program's other requirements.