How Did Some Borrowers Get Underwater On Their Mortgage?

They refinanced their home, took cash out, and are now singing the blues.  If you took out $100,000 and are now upside down you would think they still have some of that money, right?  Wrong again, they spent it.  It’s different if you put it back into your home and are just not getting the value for your improvements out of it because everything that is selling is a foreclosure or short sale.  Well, at least here in South Florida that is the case.  Bottom line, many homes were used as ATM’s. 

“Why are so many homeowners underwater on their mortgages?

In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.

A new study challenges this premise and finds that excessive borrowing may have played as great a role.”