Almost half of all mortgages underwater by 2011 – See how

Austin Kilgore wrote an article about predictions from Deutsche Bank concerning the mortgage market and the financial position of homeowners. While we certainly saw mortgage blues on the horizon well before the summer of 2007, Kilgore’s article shocked even us.

By 2011, Deutsche predicts 89% of option ARM borrowers will be underwater, up from 77% in 2009. The rate of underwater subprime borrowers will increase from 50% to 69%, and underwater Alt-A borrowers will increase from 49% to 66%.

An important factor to consider is how deep underwater borrowers will be, and it depends on their loan type.

For prime conforming borrowers, Deutsche predicts the number of borrowers with negative equity — loan to value (LTV) between 105% and 125% — will virtually equal the number of borrowers with what it calls “severe negative equity” — LTV over 125%.

But Deutsche expects the 89% of option ARM borrowers underwater to be split with most — 77% of total option ARM borrowers — holding severe negative equity. For underwater prime jumbo loans, more borrowers will have severe negative equity — 29% of the combined 47%.

The split for underwater Alt-A borrowers is expected to take an opposite proportion, with 49% of all Alt-A borrowers in negative equity and only 18% in severe negative equity. Underwater subprime borrowers will face a similar breakdown.

This quote above is from HousingWire. You should read Austin Kilgore’s entire article at HousingWire, a mortgage and real estate news site.

Study the charts and graphs. Then perhaps you can tell us if careless lending ruined the American dream of home ownership, or if there is fault at the individual family level.