Foreclosures—a multi-stage process that begins with a homeowner falling behind in their mortgage payments and can end with them losing their home—soared 71 percent in the third quarter, to an average of more than 8,500 homes a day.

More than three million homes are now expected to be in foreclosure by year’s end, a million more than even the most dire predictions.

On top of that, lenders are taking possession of delinquent properties at twice the normal rate, according to RealtyTrac, which has one of the industry’s most comprehensive databases.

That means more than one million homes are likely to be repossessed by the end of the year, which is roughly one-quarter of all US homes for sale. And it could rise to one-third of all homes for sale, which would push already distressed home prices even lower as lenders scramble to unload the properties.

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“In my wildest dreams I couldn’t have imagined that the market could have gotten this much worse, as bad as it was last year,” says Rick Sharga, senior vice president of RealtyTrac.

Why is this happening—especially when the last thing most lenders want to do is repossess a house?

For one thing, banks are overwhelmed with the sheer number of troubled mortgages. That's made it more difficult for them to work out loan modifications—essentially reducing the interest rates and even the principal to help people keep their homes.

Many mortgages also have second liens attached to them, requiring negotiations with third parties.

But the main problem is that so many mortgages have been grouped together into securities and sold off to investors worldwide. These mortgage-backed securities typically carry terms that severely limit the homeowner's ability to renegotiate a mortgage.