The number of borrowers who have negative equity ("underwater" on their mortgages), declined by approximately one million (a 26 percent drop) in the five-month period from January 1, 2015, until the end of May, according to Black Knight Financial Services ' June 2015 Mortgage Monitor  released Monday.
Though three million borrowers nationwide remain underwater, representing about 6.1 percent of the active mortgage universe, the number of underwater borrowers is down about 79 percent from the peak of 15 million in 2010, according to Black Knight.
The 26 percent decline for the first five months of 2015 outpaced the decline rate for the same period in 2014, which was 20 percent, Black Knight reported.
Approximately 158,000 of the one million fewer underwater borrowers since the start of 2015 were located in California, making it the state with the largest reduction in underwater borrower volume (34 percent) for that period, according to Black Knight. California's home price appreciation since December (6.3 percent) has been about 50 percent higher than the national average of 4.1 percent.
The state that experienced the second-largest decline in underwater borrower volume for the first five months of 2015 was Florida, with 142,000, representing only a 22 percent decline. By comparison, Illinois was third with 90,000 fewer underwater borrowers for that period, a decline of 26 percent, and Michigan was fourth with 66,000 borrowers moving out of a negative equity position, representing 40 percent of the state's underwater population. The higher percentage was likely due to Michigan's well-above average home price appreciation rate since December of 5.8 percent, according to Black Knight.
"This slower rate of reduction (in Florida) has been driven in large part by the state's home price appreciation of 3.2 percent since December, which is below the national average," Black Knight's report stated.
Fifth in underwater borrower volume reduction for the first five months of 2015 was Maryland with 50,000 fewer borrowers in negative equity, representing 27 percent of the state's underwater population. Together, the top five states accounted for close to half of the overall national reduction of one million underwater borrowers from the start of 2015 until the end of May, Black Knight reported.
The two states with the largest share of underwater borrowers at the end of May 2015 were Nevada and New Jersey with 13.7 percent and 12 percent, respectively. The state with the highest volume as of the end of May was Florida, with 498,000 (representing 11.9 percent of that state's population of borrowers).