As of the end of June, more than 15.2m US mortgages representing 32.2% -- or roughly one-third -- of all mortgaged properties in the country had fallen underwater in a negative equity position. The proportion of US mortgages underwater in Q209 came in slightly below the 32.5% seen at the end of March, according to data released Thursday by First American CoreLogic. The top five states in terms of a proportion of underwater borrowers included Nevada with 66% in negative equity and Arizona with 51% negative equity. Florida followed with 49% underwater while Michigan and California rounded out the top five with 48% and 42% respectively. “Negative equity continues to be the dominant driver of the mortgage market because it leads to foreclosures in the event a borrower experiences some kind of economic shock such as a job loss, illness or other adverse situation," chief economist Mark Fleming says. "Given that negative equity did not increase this quarter and home prices declines are moderating or flattening," Fleming adds, "we may be at the peak of the negative equity cycle. However, until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated." The aggregate property value for loans in a negative equity position and at risk for default reached $3.4trn in June. California claimed the highest share of underwater loans valued at $969bn, followed by Florida with $432bn. New Jersey and Illinois each held $146bn while Arizona followed with $140bn. Write to Diana Golobay.