About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on their loan payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices, the Mortgage Bankers Association said on Thursday.

With unemployment at a 16-1/2-year high and expected to continue rising until mid- to late 2010, more borrowers will pay late or fall into foreclosure this year, said the group's chief economist.

While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession, said Jay Brinkmann.

Duress is no longer isolated to borrowers with lower credit quality. As joblessness grew, so did late payments on prime fixed-rate loans that represent two-thirds of mortgages.

U.S. President Barack Obama's $275 billion housing stimulus program will standardize modifications for distressed loans and pave the way for more refinancing.

That should smooth differences caused by various moratoria by states and companies that temporarily curbed the surge in foreclosures in the fourth quarter, Brinkmann said.

But keep in mind that there are three drivers to the housing problem, and this program of course addresses mostly the first one, he added, referring to loan structure, underwriting quality and fraud.

The two other problems -- an oversupply caused by overbuilding and foreclosures, and unemployment -- still loom large.

Having one in eight households late paying or in foreclosure is unacceptable in a country like ours, said Nicholas Bratsofolis, senior managing director of structured refinance at mortgage bank LendAmerica in Melville, New York.

Instead of wringing our hands, I think we should start utilizing the tools that the government has given to us to remedy the ills that are facing many of these homeowners, he said.

A record 11.18 percent of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 2008.

The delinquency rate jumped 2.06 percentage points from a year ago to a record 7.88 percent. The share of loans in the foreclosure process leaped 1.26 percentage points in the year to a record 3.30 percent.

MBA started tracking the data in 1972.

Housing has yanked down the U.S. economy after being a key driver of it earlier this decade. In a vicious cycle, a weakening economy is now further siphoning demand for homes.

In a recession like this, housing is never just about housing, said Jed Kolko, associate research director at the Public Policy Institute of California, in San Francisco. Unemployment leads to foreclosures, foreclosures contribute to lower tax revenues, less consumer spending -- it's all related.

MORE STATES WITH MORE PROBLEMS

As the economy sours, more states have joined the five that had been primary trouble spots for late payments and foreclosures.

We see New York being influenced by the layoffs that we've been seeing on Wall Street and some of the rest of the industry associated with that, Brinkmann noted.

Some of the Southern states that had construction-related unemployment, whether it was forest product or plywood manufacturing. Some of the tourism industry is now being hit, certainly in Mississippi with the casinos, and in Florida.

Subprime adjustable-rate loans and prime ARM loans still drive the late payments, but that is shifting.

We will continue to see, however, a shift away from delinquencies tied to the structure and underwriting quality of loans to mortgage delinquencies caused by job and income losses, Brinkmann said.

Of particular concern, he said, is rising joblessness for people with college education or technical training. The rate nearly doubled in the last half of 2008 to just under 4 percent.

We saw some sharp pickups in delinquency rates with prime loans and I think that's now going to continue as long as we see unemployment continue to climb among the people most likely to own homes, Brinkmann said.

How high unemployment in that segment of the population gets and how long it stays there will determine ultimately how long the prime fixed loan delinquencies continue to climb, he said. Some of these people do have adequate reserves to last maybe six months or a year without a job. But the longer this thing goes on, the quicker they then run through those reserves and their loans go delinquent.

(Editing by Dan Grebler)

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