The rate of home loans entering the foreclosure process rose to a record high in the second quarter of 2007, driven largely by failing subprime mortgages, an industry trade group said on Thursday.

The Mortgage Bankers Association said 0.65 percent of loans entered the foreclosure process on a seasonally adjusted basis, 7 basis points higher than the previous quarter and up 22 basis points from a year ago.

The rate of delinquency and foreclosure for subprime loans offered to borrowers with damaged credit also rose from the last quarter and a year ago.

The subprime delinquency rate rose to 14.82 percent in the second quarter of the year from 13.77 percent at the end of the first three months.

While the national rate of failed loans continues to rise, the problems are concentrated in several of the states that saw the largest price gains during the recent housing boom, the trade association said.

What continues to drive the national numbers ... is what is happening in the states of California, Florida, Nevada and Arizona, said Douglas Duncan, the MBA chief economist.

Duncan also noted that loans to strong borrowers in a fixed-rate mortgage continue to perform well even as subprime and adjustable-rate loans slide.

The seriously delinquent rate for prime fixed-rate loans was essentially unchanged from the first quarter of the year to the second, Duncan said in a statement.

In that time, the rate of seriously delinquent subprime loans rose 277 basis points.

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