Bobby Allison

Fifteen percent of Tennessee homeowners and 23 percent in Georgia who have a mortgage owe more than their house is worth, data show.

“It’s the perfect formula for foreclosures when you get into subprime loans and property values drop and your payment goes up,” said Bobby Allison, vice president of American Home Mortgage in Chattanooga and Dalton, Ga. “You’re totally upside down.”

In Tennessee, a total of 107,506 mortgages, out of just more than 718,000, have negative equity, meaning the owners owe more on the loan than the house is worth, according to First American CoreLogic, which sells housing data to real estate professionals.

A total of 338,495 loans out of nearly 1.5 million in the Peach State have negative equity.

Tennessee ranks 13th in the nation in the number of negative-equity mortgages, while Georgia ranks fifth.

“Georgia is a Sunbelt state that experienced some of the housing bubble aspects,” said Mark Carrington, a director with First American CoreLogic, based in Santa Ana, Calif. “They’re dealing with the burst, but not as much as in Florida or California.”

As home values fail to rise as quickly as they did during the real estate boom, and homes take longer to sell, more struggling homeowners are being foreclosed upon, Mr. Allison said.

More delinquencies could be a formula for more foreclosures, one expert says.

“You’re only facing foreclosure if you default on your payments,” said William “Buddy” Bumpus of Chattanooga’s Stewart Title. “The question is, do you want to keep that house as an asset?”

Foreclosure filings in Tennessee increased 69 percent in the third quarter of 2008, from 7,080 to 11,977, according to RealtyTrac Inc., a company that sells foreclosure information to investors.

In recent years, many subprime loans were made to people who had higher debt than allowed for traditional loans, Mr. Allison said. Many of those loans had adjustable rates, which increased when the note was renewed, he said.