Mortgage Crisis
1:33 pm
Fri May 9, 2014

Homes in Hartford Top List of "Underwater" Cities

The rate of underwater mortgages correlates closely to where minority communities live.

Hartford has the highest rate of underwater mortgages in the country, according to a new report that says communities of color are most likely to owe more on their mortgages than their homes are worth. But the city administration disputes the data on which the study is based.

The study was carried out by UC Berkeley's Haas Institute for a Fair and Inclusive Society. It compared mortgage and home value data with demographic data in 100 metropolitan areas around the country, to gauge what percentage of homeowners are underwater on their mortgages.

The report authors analyze negative equity and foreclosure data together with race and income data, at a zip code level, as well as city and metropolitan area.
The report authors analyze negative equity and foreclosure data together with race and income data, at a zip code level, as well as city and metropolitan area.
Credit The Haas Institute for a Fair and Inclusive Society

In Hartford, more than half of homes -- 56 percent -- are underwater, according to the study. Other Connecticut cities also fare badly. Bridgeport has a rate of 42 percent, placing it tenth in the nation, while New Haven's rate is 29 percent.

The report points out that the rate of underwater mortgages correlates closely to where minority communities live. Report author Saqib Bhatti said that's no surprise. "Because of a history and legacy of predatory lending in the country," he said, "where you really had communities of color who were targeted for predatory loans that were designed to fail, and were pushed into higher priced loans," he said. "And so we think that it's not an accident that those are also the communities that are still paying the price."

Citywide, 56 percent of homes in Hartford are underwater.
Citywide, 56 percent of homes in Hartford are underwater.
Credit The Haas Institute for a Fair and Inclusive Society
A high rate of underwater mortgages tends to stagnate the housing market.

A high rate of underwater mortgages tends to stagnate the housing market in a locality, because it makes it impossible for many people to move.

Bhatti said that means the reported recovery in the market won't touch many communities. "There's a good likelihood," he said, "that the areas that are featured in this report -- including in Hartford, New Haven, Bridgeport, Waterbury -- that they can be stuck in this situation forever, because the situation's not going to fix itself. We really need local action. We hope that local officials in these cities will take this as a call to action."

Hartford Mayor Pedro Segarra.
Hartford Mayor Pedro Segarra.
Credit Chion Wolf / WNPR

The mayor's office for the City of Hartford said it does not believe that the figures about home values relied upon in the report are accurate. The Haas Institute compared loan figures to home values listed on the popular website Zillow. Mayor Pedro Segarra said his home, on Hartford's Prospect Avenue, appraised recently at about twice the value currently estimated on Zillow, something he said is true for many of the properties on his block. While he acknowledged the city does have a problem with underwater mortgages, he said the report over-estimates its extent.

Segarra described the valuations in the report as "unconscionable." In a statement issued to WNPR, he said, "All cities across the country are facing the residual effects of the mortgage crisis of a few years ago. We're doing everything possible to protect our homeowners, including finding ways to deal with foreclosures, working together on tax liens, working with the legislature to address our tax structure, and driving economic development so property value increases. However, the numbers here just don’t add up."

The report recommends that loan holders should reduce the principal on underwater mortgages, or allow loans to be purchased by non-profits that could restructure them. It also advocates the use of a technique called reverse eminent domain, in which a municipality itself would acquire the mortgages to restructure them.