But the number of deeply underwater borrowers is on the decline, down from 11.3 million in May and 12.5 million in Sept. 2012.
Also, one in four borrowers in the foreclosure process actually had some equity. That means they could still sell the home without a short sale and avoid foreclosure.
More than 126,000 properties in the foreclosure process nationwide had an LTV of 100 % or lower in September, representing 24 % of all homes in the foreclosure process.
Some states and cities still have a disproportionate number of underwater borrowers. States with the highest %age of deeply underwater homes (LTV of 125 % or higher) included Nevada (46 %), Illinois (40 %), Florida (40 %), Michigan (38 %), Rhode Island (34 %), and Ohio (31 %).
Nationwide 7.4 million homeowners with a mortgage had 50 % equity or more, representing 16 % of all homeowners with a mortgage. Metro markers with homeowners with at least 50% equity include Honolulu, San Jose, Calif., Poughkeepsie New York, Pittsburgh, San Francisco and New York.
-- Written by Shanthi Bharatwaj in New York.