The number of properties underwater declined slightly in the second quarter, according to a new report released by CoreLogic.

However, the turn-around isn't significant. CoreLogic reported that 10.9 million, or 22.5%, of all residential properties with a mortgage were in negative equity at the end of the 1Q11, down very slightly from 22.7% in the first quarter.

“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery," said Mark Fleming, chief economist with CoreLogic. "The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”

An additional 2.4 million borrowers had less than 5% equity, referred to as near-negative equity, in the second quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5% of all residential properties with a mortgage nationwide.

The new report also showed that nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages.

Negative equity significantly limits the ability of borrowers to capture the benefit of the low-rate environment. There are nearly 28 million outstanding mortgages that have above market rates and are in theory refinanceable, according to the report.

Twenty million borrowers with positive equity, or 53% of all above-water borrowers, have above market rates. Eight million borrowers with negative equity, or nearly 75% of all underwater borrowers, have above market rates.

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