About 10.8 million, or roughly 22.3%, of homes financed with mortgages were in negative equity at the end of the second quarter, CoreLogic said Wednesday.

Despite that figure remaining above 20%, the real estate analytics firm saw noticeable improvement from the first quarter when 11.4 million properties were underwater, representing 23.7% of the entire population of homes with mortgages.

Another 2.3 million borrowers had less than 5% equity in their homes in 2Q, putting them near-negative equity and at risk of going underwater if home prices fall.

The good news is from the first to second quarter, an additional 600,000 borrowers reached a state of positive equity, ending their underwater status.

And in just the first half of 2012, the nation saw 1.3 million borrowers transition into a state of positive equity.

Negative equity and near-negative equity mortgages made up 27% of all properties with a mortgage in the second quarter.

“The level of negative equity continues to improve with more than 1.3 million housholds regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist with CoreLogic.

The negative equity situation in the U.S. would improve dramatically if the nation experienced at least a 5% jump in annual home prices, CoreLogic CEO Anand Nallathambi said.

The state of Nevada had the highest percentage of underwater homes with approximately 59% of mortgaged properties sitting in negative equity in the second quarter. Florida and Arizona had at least 40% of financed properties in an underwater state while Georgia and Michigan saw at least 30% of their financed mortgages fall into a similar state.

Of the $689 billion in negative equity, first liens accounted for $339 billion of underwater mortgages while first-liens with home equity lines represented $353 billion, CoreLogic said. 

Borrowers affected the most by falling home values are those who acquired properties for less than $200,000. These borrowers represent 32% of the nation’s underwater properties, while only 17% of borrowers with home values greater than $200,000 are in a negative equity state, the research firm asserted.

CoreLogic’s negative equity figures are close to forecasts released by mortgage technology firm Lender Processing Services. LPS claims 18% of homeowners who are timely on their monthly payments are considered underwater. The LPS report, which focuses solely on underwater borrowers who are timely with their payments, is only a few percentage points off from the CoreLogic survey.


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