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38 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING the latest Homes Seriously Underwater continue to drop Nationwide, negative equity totaled $1.4 trillion in Q3. t he number of U.S. homeowners who were seriously underwater in the third quarter declined 11 percent from the previous quarter, falling to the lowest level in more than two years, according to RealtyTrac's Q 3 2014 Home Equity Underwater Report released in late October. RealtyTrac reported 8.1 million U.S. homeowners, representing 15 percent of all mortgages in the country, were seriously under- water in Q 3, the lowest percent- age of underwater mortgages nationwide since RealtyTrac began tracking the data in Q1 2012. A mortgage is considered seriously underwater if the com- bined loan amount secured by the property is at least 25 percent higher than the property's esti- mated market value. Seriously underwater mortgag- ors in the United States in Q 3 accounted for a combined total of $1.4 trillion in negative equity, RealtyTrac reported. The nation's seriously un- derwater rate has been steadily declining since Q2 2012, when it hit a peak of 29 percent, or 12.8 million homes, according to RealtyTrac. By Q 3 2013, the number of seriously underwa- ter properties had fallen to 10.7 million, representing 23 percent of the nation's mortgages. In Q2 2014, RealtyTrac reported there were 9.1 million seriously under- water homes, or 17 percent of all U.S. mortgages. "The decrease in underwater properties is promising, but the estimated $1.4 trillion in negative equity means that the flood wa- ters are not receding as quickly as they were before, corresponding to slowing home price appre- ciation," said Daren Blomquist, VP at RealtyTrac. "Slower price appreciation means the 8 million homeowners seriously underwa- ter could still have a long road back to positive equity." The percentage of seriously underwater properties that were in foreclosure also declined quarter-over-quarter in Q 3, from 44 percent down to 39 percent. That number has been steadily dropping as well—it was reported at 56 percent for Q 3 2013, accord- ing to RealtyTrac. Meanwhile, the share of foreclosures with positive equity jumped up from 34 per- cent in Q2 to 38 percent in Q 3. RealtyTrac reported about 8.5 million properties were on the verge of resurfacing in Q 3, with between 10 percent negative equity and 10 percent positive equity. Properties in this bracket represented 16 percent of all mortgages in Q 3, a decline from 17 percent in Q2. Equity-rich properties, which are properties with at least 50 percent equity, increased to 10.8 million in Q 3, or 20 percent of all properties with a mortgage. That's up from 9.9 million, or 19 percent of mortgaged properties in Q2. Equity-rich mortgagors combined for about $2.9 billion in positive equity, according to RealtyTrac. "We wanted to paint a picture of the typical seriously under- water homeowner, and what we found was that homeown- ers who bought or refinanced during the housing bubble (2004 to 2008), own a home worth less than $200,000, live in the Sun Belt or Rust Belt, and live in a Democratic congressional district were more likely to be seriously underwater," Blomquist said. "On the other end, the highest percentages of equity-rich home- owners were those who bought or refinanced between 1994 and 1998, those with properties valued at $500,000 or more, [liv- ing] in New York, California, or D.C., and these folks also tend to live in Democratic congressional districts."