Mortgages Originating in 2022 Are at a Growing Equity Risk, as Home Prices Continue to Correct Lower

Black Knight, a provider of innovative, high-performance software, data, and analytics for mortgage and home equity lending and services, is reporting in their December 5th mortgage monitor report that the ongoing home price correction is exposing a growing pocket of equity risk concentrated among purchases mortgage originating in 2022.

According to Black Knight, of all homes purchased with a mortgage in 2022, 8% are not at least marginally underwater. Breaking it down, of the 450,000 underwater borrowers at the end of Q3, nearly 60% of the mortgages originated in the first nine months of 2022. In total, 5% of all mortgages originated thus far this year are now marginally underwater, with another 20% in low equity positions.

Risk among earlier purchases is essentially nonexistent given the large equity cushions these mortgage holders are sitting on. More recent homebuyers have not fared as well. Among FHA purchase mortgage holders, more than 25% have slipped underwater, and more than three quarters have less than 10% equity.