Cusack Sparring Pimco On Underwater Mortgages as Risk Falls

More local governments from New York to California are considering plans to seize mortgages to protect their housing markets against homeowners abandoning properties with values below what they owe.

They may be a year too late. Data on the loans municipalities are being advised to target show fewer borrowers with underwater mortgages are defaulting and when they stop paying, modifications increasingly include balance cuts. The number of Americans with negative home equity is also falling as housing recovers from its worst slump since the 1930s, Chris Katopis, head of the Association of Mortgage Investors, said at an Aug. 14 hearing held by a Chicago city council panel.