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NEW YORK, May 28 (Reuters) - One of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process in a crisis that will persist for at least another year until unemployment peaks, the Mortgage Bankers Association said on Thursday.

U.S. unemployment in April reached its highest rate in more than a quarter century and is still rising, helping propel mortgage delinquencies and foreclosures to record highs.

Such economic weakness drove up foreclosures of prime fixed-rate loans, which are made to the most creditworthy borrowers. The foreclosure rate on those loans doubled in the last year and represented the largest share of new foreclosures in the first three months of this year.

“We clearly haven’t hit the top yet in terms of delinquencies or the bottom of the housing market,” Jay Brinkmann, the association’s chief economist, said in an interview.

The pace of defaulting mortgages jumped despite various moratoriums and government steps to cut home loan rates.

Rates on 30-year mortgages averaged 5.00 percent in March, 5.13 percent in February and 5.05 percent in January, according to home funding company Freddie Mac. A year earlier, the average monthly rates were bumping up closer to 6 percent.

“The housing market depends on the employment situation,” Brinkmann said, “and we don’t expect unemployment to bottom out until the middle of next year, so then normally housing would not recover until after employment recovers.”

A record 12.07 percent of loans on one-to-four unit residences were at least one payment late or in the foreclosure process, on a non-seasonally adjusted basis.

Prime fixed-rate loans comprise 65 percent of the $9.9 trillion in outstanding first mortgages, according to the industry group.

Foreclosure actions were started on an all-time high 1.37 percent of first mortgages in the quarter, a record increase from 1.08 percent the prior quarter.

“It’s an important reminder that just because the housing market was one of the causes of recession ... it won’t be the first sector of the economy to return to normal,” said Jed Kolko, associate director of research at the Public Policy Institute of California in San Francisco.

Federal mortgage modification and refinance programs will keep delinquencies and foreclosures from spiking even more than they would otherwise, housing analysts said.

“Even if the recession officially ended soon, in the sense of GDP turning positive again, the continued rising unemployment rate and the re-set of existing adjustable-rate mortgages would continue to aggravate both foreclosures and delinquencies,” Kolko said.

The share of loans in the foreclosure process rose to a record 3.85 percent from 3.30 percent in the fourth quarter and 2.47 percent a year earlier.

California, Florida, Arizona and Nevada accounted for nearly half of the new foreclosure activity in the quarter and half of the increase in prime fixed-rate foreclosure starts.

Those severely hit states, the biggest winners in the five-year housing boom earlier this decade, continue to worsen as recession overtakes problems spawned by lax lending standards.

“Every job loss, every divorce, every incident like that is going to be turning into a foreclosure because they are so far under water with the homes already,” Brinkmann said.

When a house is “under water,” its price has fallen below the size of the mortgage.

Average U.S. home prices swooned more than 32 percent in March from the 2006 peak, according to Standard & Poor’s/Case-Shiller indexes.

Foreclosures mounted in the first quarter even though various temporary moratoriums were in place to delay the failure of distressed loans.

The freezes artificially tempered new foreclosures before federal loan modification programs took root.

But loans that had already been modified often re-defaulted in the quarter, Brinkmann said. Foreclosure actions also were taken on vacant homes, which make up as much as 40 percent of the properties with failing mortgages, he added.

Some loan servicers also began the foreclosure process on borrowers who clearly did not qualify under the various mortgage fixes, he said.

On a non-seasonally adjusted basis, the delinquency rate dipped to 8.22 percent from 8.63 percent.

The bankers’ group noted that the late payment rate always declines in the first quarter due to seasonal factors and said that after such adjustments, the rate jumped to a record 9.12 percent.