NEW YORK - U.S. foreclosure actions shattered all records in 2009 and will do so again this year, with unemployment and wage cuts overcoming programs to remedy failing home loans, RealtyTrac said on Thursday.

A record 2.8 million properties with a mortgage got a foreclosure notice last year, jumping 21 percent from 2008 and 120 percent from 2007, the Irvine, California-based real estate data company found.

The loan failure rate -- and thus the fallout for home prices and the economy -- would have been even worse without foreclosure prevention programs and loan processing delays caused by sheer volume, the company said.

In many cases loan fixes don't stick, however, and so a new record of at least 3 million properties getting a filing is seen in 2010. Filings include notice of default, auction sale or bank repossession.

State, federal and private efforts to modify loan terms for at-risk borrowers either don't go far enough or are expanding too late to help many struggling homeowners on a permanent basis, many industry experts and economists agree.

Until the lenders start to get into principal balance reduction you're going to continue to see high redefault rates, Rick Sharga, senior vice president at RealtyTrac, said in an interview.

We haven't seen any appetite for that on the part of the lenders yet, he added.

One in every 45 households got at least one filing last year, a rate almost four times that of 2006.

On a quarterly basis, foreclosure activity did slow in the fourth quarter, declining 7 percent from the third, but rose 18 percent from the fourth quarter of 2008.

With unemployment surpassing 10 percent at the end of last year and many homeowners coping with wage cuts, timely mortgage payments got more challenging.

A foreclosure notice usually follows a pink slip by three to six months. This should ensure that even under the best case scenario there will be a high level of unemployment-related foreclosures throughout this year, Sharga said.

Refinancing to lower monthly costs was also out of the question for many homeowners because the value of their house fell below the size of their mortgage.

Despite some recent improvement, prices have toppled nearly 30 percent from their peak in 2006 through October, according to Standard & Poor's/Case-Shiller indexes.

Yale University economist Robert Shiller, a creator of the S&P/Case-Shiller home prices index, told Reuters on Tuesday he expects renewed price erosion in coming months.

Foreclosure notices were made on more than 349,000 properties in December, a 14 percent jump from November despite various moratoria, RealtyTrac said. It was the tenth straight month that notices topped 300,000, driving the year's total to a record of more than 3.9 million.

Nevada had the highest foreclosure rate for the third straight year, with more than 10 percent of households with loans getting at least one notice. Arizona and Florida were in second and third places. California, Utah, Idaho, Georgia, Michigan, Illinois and Colorado were the other states with loan failure rates among the 10 highest for U.S. states.

California, Florida, Arizona and Illinois accounted for more than half of all foreclosure actions in 2009 as more than 1.4 million properties got a notice.

BANKS SEEN HOLDING FIRE

Banks repossessed a record of more than 918,000 properties last year, 6.5 percent more than in 2008.

The pace at which banks start selling these houses is critical for gauging how much further home prices will fall.

Banks have half a million houses on their books yet to be put on the market, RealtyTrac said. There's another million properties in foreclosure and 5.5 million delinquent loans.

The doomsday prognostications say that gives you 7 million properties that are all going to go back to the banks, that are all going to hit the market at the same time and we're going to have a smoking crater where there used to be a real estate market, Sharga said. We just don't see that as being realistic.

It is widely seen in the best interest of banks, housing market and the economy for the banks to sell the foreclosed homes in a measured way to prevent prices from swooning anew.

Because of gradual foreclosure bank sales we're looking at a long, slow, flat housing market recovery that probably won't feel much better until about 2013, he said. But if it means we avoid a double dip in housing then that's probably a good thing.

(Editing by Chizu Nomiyama)

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