However, the housing crash has meant a huge percentage of people are now in negative equity.
In other words, the bank fears a house price crash that leaves homeowners trapped in negative equity.
"We live in a modest three-bedroom house which is in negative equity and we will lose our house, " she said.
And millions of American households will remain caught in negative equity, making it hard for them to contemplate a move.
"You are taking people in negative equity, pushing more money down their throat to back an asset that is still going down in value, " he said.
There has been much criticism of the loans above 100% that were available at the peak of the housing boom, which immediately placed borrowers in negative equity.
He said the government should stick to its fiscal plan, but that these measures were also needed to boost the housing market and would benefit first-time buyers, those trapped in negative equity and those looking to refurbish their homes.
As one might expect, the transaction years in which negative equity and delinquency are most common are the years in which the housing market was at its peak.
However, delinquency is substantially more common among those more deeply underwater than those in less negative equity: only 5.5% of mortgage holders between 0 and 20 percent underwater are delinquent on payments, as compared to 16% of mortgage holders who are greater than 100 percent underwater (see Figure 3).
Nevada is the state with the most loans in negative or near-negative equity, and the usual sand state suspects follow (Arizona, Florida, California), but there are a few surprises on the list of top ten most underwater states.
In the fourth quarter, Zillow determined where American homeowners freed from negative equity in 2012 were located.
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By restructuring mortgages so that homeowners have 5% equity in their properties rather than negative equity, Ocwen creates an incentive for homeowners to keep up with a more affordable payment schedule on a reduced principal.
First, new foreclosures are still coming in huge numbers, thanks to record levels of negative equity (around one in five homeowners with a mortgage), and Alt-A mortgage resets still haven't peaked.
The number of homeowners with negative equity in Iceland is growing.
As values rise, approximately 1.3 million homeowners nationwide have been lifted out of negative equity in the third quarter compared with the second quarter.
FORBES: Mortgage Settlements Not Likely To Move Housing Market
This growth should be enough to both lift considerably more homeowners out of negative equity in 2013 and persuade more potential sellers to list their homes and help ease supply constraints in some areas.
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Mr Obama's advisers were drawn to the first school, in part by a Federal Reserve Bank of Boston study that found that when home prices fell 23% in Massachusetts between 1988 and 1993, only 6.4% of borrowers with negative equity ended up in foreclosure.
However, while the rate of negative equity is higher in younger age brackets, the delinquency rate is noticeably lower.
Edward Pinto, an independent financial industry consultant, estimates that 20% of borrowers with negative equity went to foreclosure in the past three years, in part because they started out much less creditworthy than their counterparts in Massachusetts two decades ago.
Fears of a property bubble that, if it burst, could create urban China's first widespread experience of negative equity prompted the authorities in Shanghai last week to announce a 5.5% capital-gains tax on the sale of property held for less than a year.
Looking at our sample of borrowers, we see that negative equity is most common in younger age brackets with 39% of borrowers age 20 to 24, 48% of borrowers age 25 to 29, and 51% of borrowers age 30 to 34, underwater on their mortgages.
Thus, the balance sheet looks like this: 850 of assets (after a 150 loss), 900 of liabilities in the form of borrowed money, and negative equity of 50.
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"If the equity in the house is sufficiently negative, there may be an incentive for the household to engage in a short sale, " says Anthony Sander, a finance professor at Arizona State University.
As a result, negative equity will remain a major factor in the market for the foreseeable future.
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All three major U.S. equity indices closed the day deep in negative territory, led by the Nasdaq, down 2.1% to 2, 814.
In late August, Zillow released its second quarter Negative Equity Report.
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Moreover, in addition to the 25% of homeowners with negative equity, a similar proportion have insufficient positive equity to refinance their high fixed-rate mortgages.
The facts seemed to support this as the mediocre jobs report, with a deceleration in most indicators, had little negative impact on the equity market.
House prices have halved since the Ireland's property market peaked in 2007, leaving an estimated 400, 000 mortgage holders with negative equity.
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