Nearly 11 million properties, roughly 22.5% of all U.S. homes, were worth less than the underlying mortgage in the second quarter, according to CoreLogic (CLGX). The percentage of properties in negative equity declined slightly from 22.7% the previous quarter and down from 24% one year ago. Another 2.4 million borrowers held less than 5% equity in their home, what analysts call near-negative equity. CoreLogic also showed nearly three-quarters of all underwater borrowers are paying above-market interest on their home loans. "High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery," said Mark Fleming, CoreLogic chief  economist. More borrowers could be in danger of falling underwater. JPMorgan Chase (JPM) analysts expect home prices to drop another 5% by the beginning of 2012, pushing the amount of underwater borrowers to 15 million, according to a research note released earlier in the month. If prices drop more, possibly 10% further, the number of borrowers in negative equity would approach 20 million. The Obama administration continues working on a proposal to boost refinancings, which many include eliminating some negative equity restrictions on Fannie Mae and Freddie Mac loans. Some analysts believe such a program would have only modest impact, but CoreLogic showed nearly 28 million outstanding mortgages hold above-market rates and, in theory, should be able to refinance. Of these, 8 million borrowers are in negative equity. Some believe the new plan from the administration will be a revamp of the Home Affordable Refinance Program, which allows Fannie and Freddie borrowers with up to 125% LTV to refinance. But more than 40% of borrowers with LTVs above that limit are trapped with mortgage rates above 6%. Only 17% of borrowers with positive equity have rates at that level. Negative equity also affects sales. Traditional home sales in areas with low negative equity numbers dropped 61% since the peak in 2005, compared with an 83% drop in areas with more underwater borrowers. Roughly 60% if borrowers in Nevada were underwater in the second quarter, the highest percentage of any state but down from 68% one year ago. It was followed by Arizona at 49% and Florida at 45%. "The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices," CoreLogic said. Write to Jon Prior. Follow him on Twitter @JonAPrior.