If your neighbors have lost their homes, you could be penalized if you try to sell or refinance - even if you have good credit.
Neighbors matter when it comes to putting a price tag on homes. Appraisers use comparable sales data to calculate the value of a home, a number that lenders require for selling and refinancing. Comparable sales in neighborhoods plagued by foreclosures knock down the value of homes.
The problem, which makes it much more difficult for borrowers to pull cash out of their homes, is another sign of how a sick housing market infects the entire economy, one neighborhood at a time.
Mortgage brokers and appraisers in California, Florida, and Nevada - where home prices have fallen the most and foreclosure rates are highest - say more homeowners are in this situation.
The number of US homes facing foreclosure jumped 57 percent in January from a year ago, and more than 230,000 homes received notices from lenders, according to RealtyTrac Inc.