The number of U.S. homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.

The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 per cent, marking the third consecutive quarter that this figure has set an all-time high.

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 per cent of all loans, up nearly three-quarters of a percentage point from the same period a year ago.

Doug Duncan, the MBA's chief economist, said the worsening performance was driven by two factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana, and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.

Now with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.

Another big problem is that an estimated two million adjustable-rate mortgages are scheduled to reset this year at sharply higher interest rates, which will cause monthly payments in some cases to double or even triple, a problem that is especially severe in the market for subprime mortgages, loans offered to borrowers with weak credit histories.

The delinquency rate for subprime loans increased sharply to 14.82 per cent — up from 13.77 per cent — in the first quarter.

The delinquency rate for prime loans, offered to borrowers with good credit histories, also increased, but by a much smaller amount, rising to 2.73 per cent, up 2.58 per cent in the first quarter.

Democrats have blamed predatory lending practices for a large part of the current problems and have introduced a number of bills aimed at helping homeowners stay in their houses.

Federal and banking regulators issued guidance this week encouraging lending institutions to work with borrowers to restructure loans at more favourable terms rather than foreclosing on the existing mortgages.

Last week, President George W. Bush announced changes in the Federal Home Administration insured-loan program to help combat the expected wave of foreclosures and also answer attacks from Democrats that his administration has been slow to respond to a growing crisis in mortgage foreclosures.