Foreclosures thin ranks of underwater borrowers

Price declines threaten to reverse recent improvements

The homeownership rate could fall below 60 percent if homeowners who are deeply underwater end up losing their homes, a new report from mortgage data aggregator CoreLogic suggests.

Some 10.78 million homeowners were "underwater" during the third quarter, meaning they owed more on their mortgages than their homes were worth. About 22.5 percent of all homeowners with mortgages had negative equity.

That’s a slight decline from the 10.97 million homeowners who CoreLogic estimates were underwater in the second quarter, but the improvement was driven primarily by foreclosures rather than rising home values.