CHICAGO (MarketWatch) -- The percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, the highest percentage ever recorded by the Mortgage Bankers Association, the industry group reported on Thursday.

During a conference call with reporters, the group's chief economist said he expects that mortgage delinquencies will continue to grow as the nation's employment picture worsens, and the percentage of borrowers behind on their mortgages will climb until the middle of next year. Foreclosures will likely peak six months later, at the end of 2010, according to MBA estimates.

The delinquency rate for mortgages on one- to four-unit properties rose to a seasonally adjusted 9.24% of all mortgage loans outstanding in the second quarter, up from 9.12% in the first quarter and 6.41% in the second quarter of 2008, according to the MBA's national delinquency survey. The delinquency rate doesn't include mortgages in the foreclosure process.

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the first quarter and 2.75% in the second quarter of 2008, the MBA said.

However, mortgages entering the foreclosure process during the second quarter actually fell slightly to 1.36% of all loans, down from 1.37% in the first quarter. Foreclosure starts were still up from 1.08% in the second quarter of 2008.

The survey covers 45 million loans on one- to four-unit residential properties, representing between 80% and 85% of all first-lien residential mortgage loans outstanding in the United States. Records date back to 1972.

"While the rate of new foreclosures started was essentially unchanged from last quarter's record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase," said Jay Brinkmann, MBA's chief economist, in a news release.

Brinkmann said he isn't reading into the flat foreclosure start figures for hopeful signs. In Illinois, there was a significant drop in foreclosure starts, which likely resulted from a state law that slowed down the foreclosure process, he said. He's also keeping in mind that during much of 2008, foreclosure starts were also flat, until they spiked earlier this year when various foreclosure moratoria lifted.

Prime borrowers in trouble

"As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five," Brinkmann said in the release. In a phone interview, Brinkmann said that prime fixed-rate mortgages account for two-thirds of all mortgages outstanding in the country.

Forty-one states had increases in the foreclosure start rate for prime fixed-rate loans, while 43 states had decreases in that rate for subprime adjustable-rate loans, he said.

The MBA also reported a jump in foreclosures on loans backed by the Federal Housing Administration. The foreclosure starts rate for FHA loans was 1.15%; the FHA percentage remained somewhat lower than other loan types due to the increase in the number of FHA loans outstanding, Brinkmann said.

Until the nation's employment situation improves, it is unlikely that there will be meaningful reductions in the foreclosure and delinquency rates, he said. And until prices recover in areas with steep home price declines, borrowers who owe more on their mortgage than their home is now worth will continue to be in danger of foreclosure -- especially if they're faced with a life event including divorce or job loss.

Loan modification programs are playing a role in holding the foreclosure rates below where they would otherwise be, but the "issue is that many of the foreclosures involve homes that are vacant, borrowers who no longer have jobs, or loans where there was fraud involved," Brinkmann said in the news release.

"Therefore, in measuring the effectiveness of industry or government loan modification programs it is necessary to compare the results not with the total foreclosure and delinquency numbers reported here but with the smaller subset of borrowers who can and want to qualify," he added.

The programs were set up and developed based on the industry's experience in dealing with subprime ARMs or pay-option ARMs -- loans that originated with high debt-to-income ratios, he said in an interview. The modification is made to reduce payments to a more manageable level.

But if a borrower loses a job, the problem isn't paying too much income to a loan each month -- it's that he or she has no income at all.

Tough times in Florida

California, Florida, Arizona and Nevada still have a "disproportionately high share of foreclosure starts," Brinkmann said, but the share has fallen slightly from last quarter.

Yet Florida is continuing to establish itself as the worst state in the country for mortgage performance, he added.

In Florida, 22.8% of mortgages outstanding were delinquent at least one payment or in foreclosure. Other poor performing states include Nevada, where 21.3% of mortgages were delinquent or in foreclosure, Arizona, where 16.3% were delinquent or in foreclosure, and Michigan, where 15.3% were delinquent or in foreclosure.

Brinkmann said Florida's troubles likely stem from the overbuilding of condos in the state, as well as the makeup of its economic base -- the leisure and hospitality industry, which has struggled in the downturn. Nevada also has been affected by those factors.