The number of foreclosures continues to rise and failing mortgage fallout is making it tougher for some borrowers to land loans and move into homes. RealtyTrac said, in February, the national rate of troubled loans -- default notices, auction sale notices and bank repossessions -- rose by 12 percent from a year ago.

That puts the national foreclosure rate for the month at one foreclosure filing for every 884 American households.

Based on the first two months of 2007, foreclosure activity is poised to exceed the number of 2006's foreclosures by 33 percent, according to RealtyTrac.

Last year, there were 1.2 million filings, this year, at the current rate, the number could reach 1.6 million said spokesman Daren Blomquist.

Blomquist estimated at least 50 percent of the foreclosure numbers are coming from the subprime market.

That's not a surprise.

The late 2006 "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners" forecast from the Center For Responsible Lending said nearly 20 percent of all subprime mortgages originated in the last two years will ultimately end in foreclosure. That will cause some 2.2 million households to lose the farm.

"The subprime industry has been under the microscope for the past month or two because of the high number of defaults they are getting," Blomquist said.

Federal money policy agencies recently opened for public comment new guidelines for subprime mortgage underwriting, designed to ward off subprime woes in the future.

The "Proposed Statement on Subprime Mortgage Lending" was jointly crafted by the same group of federal monetary agencies that late last year rewrote the rules on nontraditional home loans and equity loans, which helped boost the boom but also proved problematic.

Meanwhile, subprime lenders are failing, closing up shop, selling off loans or attempting to reduce their risk by limiting the number of new subprime loans they write.

Subprime loans are generally more expensive than prime loans, but they are intended for borrowers who pose a greater risk to lenders, typically because of their lack of credit or previous credit problems. The loans were sold as an opportunity to achieve the American Dream for those who otherwise may have been locked out.

But many borrowers were sold a bill of goods and signed up for more than they could truly afford, as indicated by the disproportionate number of subprime foreclosures.

As a result, Freddie Mac recently announced it will no longer purchase subprime adjustable rate mortgages (ARMs) when lenders qualify borrowers at the introductory interest rate instead of considering affordability after the scheduled interest rate increases.

And that's forcing some lenders to stiffen underwriting rules, which is, in turn, leaving some would be home buyers without a mortgage.

Borrowers' creditworthiness is most often gauged by his or her credit score under the FICO system developed by Fair Isaac Corp.

The best mortgage rates and terms go to prime borrowers typically with scores of 720 or more. Subprime borrowers often have scores below 620.

Unfortunately, foreclosure fallout is spreading to the so-called "Alt-A" loans, those nontraditional mortgages offered to borrowers with credit scores between 620 and 700. The loans include interest-only loans, option ARMs, loans requiring little if any income documentation and others.

Surviving lenders are dropping some 100 percent financing loans, requiring higher credit scores, cutting maximum loan amounts and otherwise making the riskier loans tougher to get.

In an online survey of Washington, D.C. urban area real estate agents, 73 percent of those surveyed said they were having problems getting purchases into escrow because of tighter standards on subprime and Alt-A loans.

More than 60 percent said clients were encountering difficulty qualifying for loans they needed to buy a home, according to the survey by City Influence, a market research firm specializing in urban real estate.

"I think this raises a number of questions about the longer term impact of mortgage availability on the velocity of sales in the market," said Kim Hoover, President of City Influence.

"We know that a significant portion of buyers who were able to enter the home ownership category over the last decade took advantage of more flexible lending standards. The question is, if that group is unable to buy a home going forward, how much of a ripple effect will that have up the chain?"

RealtyTrac said Nevada, Colorado and Florida posted the top foreclosure rates (per households) with Nevada's number of foreclosures up 77 percent in the last year; Colorado's were up more than 28 percent and Florida's by more than 91 percent.

Other states with high foreclosure rates included Georgia, Michigan, Tennessee, Ohio, Texas, Arizona and Indiana.

In sheer numbers, Florida, California and Texas had the most foreclosure activity but Texas' foreclosure numbers dropped more than 9 percent from a year ago, while California’s numbers rose more than 78 percent.

Published: March 26, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.