He would be staring at a negative equity hole from which he might never climb out and, at the same time, would be shut out from a lower-rate loan because of the 105% LTV limit under the MHAP.
But nearly 20% of households now have mortgages worth more than 90% of their property's value, which leaves them at risk of negative equity if prices fall further.
The prospect of further defaults was highlighted by figures showing one in six HBOS mortgage customers, around 17%, were in negative equity at the end of last year.
Just under 7% of all American homeowners had this "negative equity" at the end of December 2006 estimates Mr Cagan, using a sample of 32m houses (see chart 1).
Its estimate comes very much at the lower end of the range implied by Halifax and Nationwide house price surveys, which suggests that between 870,000 and 1.18 million borrowers were in negative equity at the end of February.
About 8.31 million properties had negative equity at the end of the year, up 9.0% from 7.63 million at the end of September.
Perhaps a quarter of all home mortgages suffered from negative equity at the end of 2009 and another 5% looked headed that way, Barclays analyst Jason Goldberg wrote last week.
There is wide regional variation, with 41% of borrowers in Northern Ireland - 68,000 homeowners - in negative equity at the end of 2013, the figures from mortgage group HML show, In north-east England and Cumbria the figure is 16%.
And we are not going back to the go-go years". Underwater homeowners in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties were a staggering $138.9 billion deep in negative equity at the end of the first quarter, Zillow reported.
In the first quarter of 2013 negative equity stood at 25.4%; by Q4 2013 it was at 19.4%.
