California had 1.9 million borrowers with negative equity at year-end, more than any other state, followed by Florida's 1.28 million. About three in 10 borrowers in both states were underwater.

By other measures, Nevada was the most stressed, with 55 percent of owners having negative equity and borrowers on average owing 97 percent of what their homes are worth. About 28 percent owe more than 125 percent of their homes' value.

Michigan had 40 percent of its homeowners underwater, while Arizona had 32 percent.

New York fared best, with just 4.7 percent of borrowers with negative equity and an average 48 percent loan-to-value ratio, though this could change as employment and bonuses slide in the financial services industry.

According to the S&P/Case-Shiller Home Price Indices, prices of U.S. single-family homes slumped 18.5 percent in December from a year earlier, the biggest drop in 21yrs!