One out of five borrowers owes more on their mortgages than the current value of their homes according to the report by First American CoreLogic, a real estate research firm, released Friday.

The number is expected to increase as 2.1 million borrowers are standing on the edge as their homes are worth 5% less than the mortgages they are paying.

This type of occurrence is commonly referred as “underwater” or technically known as having "negative equity."

"Being underwater leaves homeowners vulnerable to foreclosure," said Mark Fleming, CoreLogic's chief economist.

This is because the borrowers are left with nothing to tap for a refinancing or a home equity loan if experience financial trouble. Negative equity has contributed much to the increasing number of foreclosures over the past year.

"Being underwater doesn't necessarily mean that you can't pay your bills," said Fleming, "but it's a necessary condition of default."

Borrowers who have negative equity in their home  but have enough income to pay bills can keep up with their mortgages even if they don't like paying more for a home less than its current woth. On the other hand, anyone who runs into trouble paying their bills but has positive equity in their home can avoid foreclosure by either borrowing against their home or simply selling it.

Hardest hit are the Nevada homeowners where 48% of them are “underwater.” Nevada home values dropped by more than 30% during the past 12 months and tops the list of states with highest number of underwater borrowers.

Homeowners in California, Arizona, Florida, Georgia and Michigan account for nearly 60 percent of all homeowners who have negative equity.