The WSJ today reports that 40% of homeowners who took a second mortgage during the last several years and had not paid it off when the economy went south are "underwater." This compares with 18% of other homeowners. Of course, it would be no surprise that the less equity one has in his home, the faster that equity disappears as housing prices go down. But the magnitude is striking.
The article is worth reading because it discusses the consequences both at the macro level ("the second mortgages are weighing on a fitful recovery") and at the micro level (its harder for a homeowner to get a credit card, etc. "There are all sorts of little, pernicious effects that you don't necessarily think about.")
The article also makes the point that while the first mortgages that the banks extended were "packaged" and sold into the syndication market, the banks kept the second mortgages. So those mortgages are presently a drag on the balances sheets of both the giants and the locals. (Not to say that the banks who sold the first mortgages are immune to claw-back liability. We haven't heard the last of that either.)
I have no special knowledge, of course, but it seems to me that we are not near the end of this unwinding.