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Arizona homeowners still struggling to overcome underwater mortgages

Though the housing market slowly got back on its feet after suffering severely in the recession, Arizona still is deep underwater.

Or 18 percent underwater, anyway.

An underwater mortgage rate is defined as follows:

“A home purchase loan with a higher balance than the free-market value of the home. This situation prevents the homeowner from selling the home unless s/he has cash to pay the loss out of pocket. It also prevents the homeowner from refinancing in most cases. Thus, if the homeowner wants to sell the home because s/he can’t afford the mortgage payments anymore, perhaps because of a job loss, the home will fall into foreclosure unless the borrower is able to renegotiate the loan.”

Arizona sits at 18 percent — below the national underwater rate average of 15 percent — and has the ninth worst rate in the United States, according to a study done by RealtyTrac.

Nevada has the worst rate at 31 percent, followed by Florida with 28 percent, then Illinois with 26 percent.

Despite this poor news for Arizona, the city of Phoenix seems to be doing just fine: It’s not among the worst underwater local markets.