Delinquencies on mortgages rose to nearly 14 percent in late 2009, led by a sharp increase in seriously overdue home loans held by the most credit-worthy borrowers, U.S. banking regulators said on Thursday.

The percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009, down 0.9 percent from the previous three months, marking a decline for the seventh consecutive quarter, the report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision said.

It was also down 3.9 percent from a year earlier.

The decline was attributable to a 21.1 percent jump in mortgages 90 or more days past due, to 4.7 percent of all mortgages in the portfolio at the end of 2009.

The increase in seriously delinquent mortgages was most pronounced among prime borrowers, with an increase of 16.5 percent in seriously delinquent mortgages during the fourth quarter.

The jump in seriously delinquent mortgages is likely to lead to a rise in foreclosure actions, the report said.

So-called prime mortgages are granted to the most credit-worthy borrowers, a sector that initially raised few worries when the housing bubble burst.

The continued decline in performance of prime mortgages is a significant trend, given those mortgages accounted for 68 percent of all home loans within the portfolio.

The report by the U.S. Treasury Department units covers nearly 34 million loans totaling almost $6 trillion in principal balances and provides information on their performance through the end of the fourth quarter of 2009.

The report defines serious delinquencies as those loans 60 days or more past due and loans delinquent to bankrupt borrowers.

The OCC and OTS Mortgage Metrics Report provides performance data on first-lien residential mortgages serviced by national banks and federally regulated thrifts. The report covers all types of first-lien mortgages serviced by most of the industry's largest mortgage servicers.

The mortgages in this portfolio comprise more than 64 percent of all mortgages outstanding in the United States.

Without the help of government, state and private loan modification programs, many of the homes backed by these delinquent loans could go into foreclosure. Foreclosures are by far one of the biggest threats to the U.S. housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention.

While servicers reported that HAMP (Home Affordable Modification Program) and proprietary foreclosure prevention programs will help a significant number of distressed homeowners, they indicated these programs are not expected to help all delinquent borrowers, the report said.

In this regard, servicers reported that they expect new foreclosure actions to increase in the upcoming quarters as many of the mortgages that are seriously delinquent may eventually result in foreclosure as alternatives that prevent foreclosure are exhausted, the report said.

Home forfeiture actions -- foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions -- increased by 8.6 percent from the previous quarter to 163,224. That is up 44.5 percent from a year earlier.

The number of newly initiated foreclosures, however, dropped by 15.4 percent from the previous quarter to 312,529 after remaining steady the three prior quarters.

But that is up 19.0 percent from a year earlier. The number was curtailed as more loans are held in a delinquent status for an extended period as borrowers and servicers pursue alternate workout solutions, the report said.

Mortgage