Wall Street Journal: Almost 40% of homeowners who took out second mortgages are underwater

By ROBBIE WHELAN

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn't take out such loans.

WSJ's Robbie Whelan reports nearly 40% of homeowners who have a second mortgage--that is, they owe more than their home is worth. Photo: Mark Rulston/AFP/Getty Images

The finding, in a report to be released Tuesday by real-estate data firm CoreLogic Inc., illustrates the consequences of easy borrowing amid the housing boom's inflated prices. The report says 38% of borrowers who took cash out of their residences using home-equity loans are underwater, or owe more than their home is worth. By contrast, 18% of borrowers who don't have these loans were underwater.
It's not clear how much cash withdrawn from homes during the boom was used to acquire luxuries such as expensive automobiles, and how much went to basic necessities, including tuition expenses, or renovations intended to raise a property's value.  Read article