A new Q2 state ranking from ATTOM published Sept. 11 put Minnesota at the top of the country for seriously underwater mortgages, with 12.1% of mortgaged residential properties in that category. Minnesota’s rate was up sharply from 2.6% a year earlier, while Louisiana followed at 10.3%.
Nationally, 3.2% of mortgaged residential properties were seriously underwater in the second quarter of 2026, unchanged from Q1 but up from 2.7% a year earlier. For listing agents, the numbers make a seller’s equity position worth checking before pricing the home or estimating proceeds.
Where underwater mortgages are rising
After Minnesota and Louisiana, the highest shares were in Iowa at 7.8%, Mississippi at 6.4%, and Arkansas at 6.0%. Seriously underwater rates increased year over year in 33 states and Washington, D.C.
The broader equity picture weakened as well. The share of equity-rich mortgaged homes fell to 41.1% in Q2, from 43.3% in Q1 and 47.4% a year earlier, as agents also navigate weaker 2026 home price growth in some markets. ATTOM defines a property as seriously underwater when its combined estimated loan balances are at least 25% greater than its estimated market value.
A statewide percentage cannot tell you whether a specific homeowner can afford to sell. A seller with modest negative equity may be able to bring cash to closing, while an owner with positive equity could still have too little left after liens and transaction costs to make a sale workable.
What agents should verify before listing
Start with a current comparative market analysis, clearly presented as an estimate rather than a guaranteed sale price, and weigh it against local pricing conditions. Have the seller request a payoff amount from the servicer rather than rely on the mortgage statement balance. The payoff can include interest through the payoff date and other charges required to satisfy the loan.
A preliminary title search can identify liens or claims against the property that may not appear in the first-mortgage payoff. With value, payoff information, and title findings in hand, agents can build a realistic seller net sheet that accounts for brokerage compensation, applicable taxes and prorations, seller concessions, and other transaction costs. The key question is whether expected sale proceeds can cover the debts and costs that must be resolved at closing.
Why underwater doesn’t automatically mean default
Negative equity alone does not predict default. A Federal Reserve Bank of Boston study found that mortgage default historically has reflected a combination of negative equity, income shocks, and changes in the relative cost of owning versus renting. Separate research on underwater mortgages found that some borrowers continued repaying despite negative equity. Neither study forecasts how today’s borrowers will behave.
Four checks before taking the listing
For a seller in a market with weakening equity:
- Pull a current CMA and obtain the seller’s actual payoff amount.
- Run a preliminary title search for additional liens or claims.
- Build a complete net sheet using local transaction costs and likely concessions.
- Determine whether the seller can cover any projected shortfall.
Minnesota’s 12.1% rate identifies a market where thin equity deserves attention, but it cannot determine whether an individual homeowner can sell. Property value, the mortgage payoff, title findings, and the seller net do.