Bank of America Corp (BAC), Wells Fargo & Co (WFC): 5 Facts about Underwater Homeowners

4. But things are getting better
The good news is that things are getting better. In the fourth quarter of 2011, there were 12.1 million underwater mortgages. This figure has come down consistently and, as I noted above, was at 9.7 million at the end of the first quarter of this year. In percentage terms, negative-equity loans have gone from 25.2% of all mortgages down to 19.8% over this same time period.

You can also see this improvement in figures provided by lending giant JPMorgan Chase & Co. (NYSE:JPM). Between the fourth quarter of last year and the first quarter of this year, the average loan-to-value ratio of its mortgage portfolio went from 81% down to 79%, meaning that its customers cumulatively recouped 2% of equity on their homes.

The improvement on this front has freed up millions of borrowers both mentally and financially. As CoreLogic’s chief economist observed, “During the past year, 1.7 million borrowers have regained positive equity.”

5. And things are positioned to continue getting better going forward
Even though we won’t have second-quarter data for another month, it seems safe to assume that the improvements on this front will continue, at least for the foreseeable future. I say this because CoreLogic estimated that a 5% increase in home values from where they were at the end of March would return 1.6 million homes to the realm of positive equity. Meanwhile, recent data shows that they did indeed head higher last month by anywhere between 0.7% and 2.52%, depending on the source.

The Foolish bottom line
The significance of the housing sector and its continued improvement cannot be overstated. But in order for it to truly mend, the number of underwater homeowners must abate. My colleague Morgan Housel has said more than once that there are only a handful of economic variables that truly matter at any one time, and the rest are just noise. Right now, the population of underwater homeowners should be included among the former.

The article 5 Facts about Underwater Homeowners originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America Corp (NYSE:BAC). The Motley Fool recommends Bank of America and Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo.

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