A new study of underwater mortgages concludes that taking out second and third liens is more likely to cause an equity shortfall than the decline of the market overall, reported WSJ.

Michael LaCour-Little, a professor of finance at California State University at Fullerton, examined 4,000 foreclosures. He concluded that the average buyer in foreclosure purchased his home in 2002 or earlier and four out of five had at least a second mortgage.

Borrowers took out eight times the amount of cash they invested in their homes, the study found.

Why such borrowers should enjoy any special government benefits such as waiver of the income taxation on debt forgiveness or subsidized loan modifications to reduce their borrowing costs is at best unclear, LaCour-Little says.