WASHINGTON – Just under half of all Arizona mortgages were “underwater” in spring of this year, the second-highest percentage in the nation, according to a report from a private research firm.

CoreLogic said only Nevada, at 63 percent, had a higher rate of homes underwater at the end of the first fiscal quarter of 2011, the most recent period for which it had a report.

An underwater mortgage is a home with negative equity – when a person owes more on his mortgage than his home is worth.

Arizona homeowners who were underwater averaged $60,000 in negative equity, according to the report, below the national average of $65,000. New York borrowers held the highest negative equity with an average of $120,000, but only 6.2 percent of mortgages in that state were underwater.

Phoenix was the third-highest metro area in the nation, with 55 percent of its mortgages underwater, said CoreLogic, trailing Las Vegas and Stockton, Calif.

Bankers in Arizona said they sense that foreclosures are starting to slow down as the market attempts to stabilize.

“We may be bottoming out here,” said Paul Hickman, president of the Arizona Association of Bankers.

Large surpluses of housing are still keeping both housing and banking in gridlock. But experts don’t believe the situation can get worse than it is right now.

Hickman said the banks are trying to avoid foreclosures, if only to avoid having to pay to maintain them – a cost that can grow exponentially with about 100,000 foreclosed homes in the state.

“Foreclosures are flattening; they are not putting all that inventory on top of current inventory,” Hickman said.

But state housing officials say requests remain high from people seeking help with their mortgage payments.

“We have been seeing a lot of activity,” said Shaun Rieve, spokesman for the Arizona Department of Housing.

Rieve said the department got more than $267 million from a federal program that targeted states with the biggest losses in the subprime-mortgage crisis of 2008. The Principal Reduction Program could allocate up to $50,000 toward a homeowner’s principal if the lender matched that amount, up to 31 percent of the mortgage, according to the state Housing Department.

But Rieve said few big lenders came on board with matching funds.

The department has since redirected $36 million to an unemployment-assistance fund that pays up to $2,000 a month in mortgage aid to unemployed homeowners who meet other requirements. The new program has been far more successful, he said.

Lenders said they are also offering loan-modification programs and financial counseling to assist borrowers with underwater mortgages.

“We do not want to own people’s homes,” said Chase Bank spokeswoman Mary Jane Rogers.

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