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Underwater mortgages on the rise

More homes with mortgages were underwater in the fourth quarter of 2011.

More homes with mortgages were underwater in the fourth quarter of 2011.

More homeowners found themselves underwater on their mortgages during the fourth quarter of 2011, according to a new market analysis from CoreLogic.

The March 1 report found that 22.8 percent of all homes with a mortgage held negative equity at the end of last year, compared with 22.1 percent during the third quarter. This represents an increase of roughly 400,000 homes. Total outstanding debt on negative equity mortgages rose over the same period from $2.7 trillion to $2.8 trillion.

"The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason we have such a significant foreclosure pipeline," according to Mark Fleming, chief economist with CoreLogic. "While the economic recovery will reduce the propensity of the inability to pay trigger, negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures."

The state with the most mortgages in negative equity during the fourth quarter was Nevada, according to the report. A separate report released recently by RealtyTrac also found that Nevada had the highest percentage of foreclosed home sales during the fourth quarter. Families looking for a deal when moving out of state might keep an eye on Nevada - RealtyTrac also found average foreclosure home sales prices were 29 percent lower than non-foreclosure properties.