NEW YORK - U.S. home foreclosure filings slowed in October for a third straight month, but rising unemployment will spur another record year of failing mortgages in 2010, real estate data company RealtyTrac said on Thursday.

Foreclosure filings -- including notices of default, auction and bank repossession -- dipped 3 percent in October from the prior month but were up 19 percent from a year earlier.

Although foreclosure filings are off the record high hit in July and there are intensifying federal efforts to press lenders to alter terms for struggling borrowers, the chief problem lies with unemployment that is at a 26-1/2-year.

RealtyTrac estimates as many as a record 3.4 million households will get a foreclosure notice this year, a 48 percent spike from 2.3 million last year.

And RealtyTrac sees yet another record high in 2010, with only marginal improvement in 2011.

Unless we have an almost miraculous recovery in housing and employment, there's really no way to get through this pipeline any earlier than that, Rick Sharga, senior vice president at Irvine, California-based RealtyTrac, said in an interview.

More and more of the homes in foreclosure right now are there because of unemployment, Sharga said. The scale of the problem is so huge that it's hard to make a dent.

With filings reported on 332,292 properties last month, one in every 385 households with loans got a foreclosure notice.

Lenders cannot keep pace with the number of failing U.S. home loans even though an increasing share of eligible borrowers have entered trial mortgage workouts.

The Treasury Department on Monday said about 20 percent of eligible homeowners, almost 651,000 through October, were in trial modifications under President Barack Obama's Home Affordable Mortgage Program. That is up from 16 percent the prior month.

It remains to be seen how many of these trials will be become permanently modified and how many of the modifications will ultimately be successful.

It's hard to describe the housing market as stable or being in good shape when over 3 million families are receiving foreclosure notices this year, said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts.

DELAYING INEVITABLE

Various local and federal loan fixes may just be dragging out the foreclosure crisis.

A Nevada law, for example, that requires mandatory foreclosure mediation resulted in a 26 percent drop in foreclosure actions started in October, Sharga noted. That doesn't mean they won't ultimately go into foreclosure, but they were delayed.

Despite the month's drop, Nevada still had the highest foreclosure rate, with one in every 80 households with loans getting a filing in October.

California stayed in second place and Florida held the third spot.

Arizona, Idaho, Illinois, Michigan, Georgia, Michigan and Utah were the other states with the 10 highest foreclosure rates.

California, Florida, Illinois and Michigan accounted for 52 percent of the total foreclosure activity in October.

The top 10 metro area foreclosure rates were all in Nevada, California and Florida, but new problem areas have emerged as joblessness grows. To read more on regional foreclosures (Editing by Leslie Adler)

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