More than 40% of the 2 million recently modified mortgages facing interest-rate resets are underwater, according to data released Monday by Black Knight Financial Services.

By comparison, the Jacksonville, Fla.-based firm's analysis of April mortgage performance showed that the national negative equity rate was 9.4%.

"We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture," said Kostya Gradushy, manager for loan data and customer analytics, in a June 2 press release.

"Given that the data has shown quite clearly that equity — or the lack thereof — is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead," Gradushy added.

The Black Knight report also showed that more than 10% of all borrowers are in a "near negative equity" position, meaning they have less than 10% equity in their homes. This trend is particularly pronounced in New Mexico and Southern states.

"While the overall situation for underwater borrowers has improved significantly, there are still areas in the country where borrowers are hovering at the edges," Gradushy said.

Mortgage prepayments increased for the second month in a row. Borrowers with adjustable-rate mortgages below 6%, in particular, prepaid at higher rates than those with fixed-rate mortgages, indicating a potential concern about rising interest rates.

Additionally, the gap in the rate of foreclosure completions between judicial states and non-judicial states narrowed to its closest point since 2005. The pipeline ratio — a comparison of loans in foreclosure to the current rate of foreclosure completions — was 52 months for judicial states, down from its peak of 118 months in 2011. The ratio for nonjudicial states was 48 months, its highest point to date.

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