The number of homeowners behind on their mortgage payments hit a new high during the second quarter, with more than one in eight homeowners delinquent or in the foreclosure process.

The Mortgage Bankers Association national delinquency report showed that even as delinquencies have slowed on exotic subprime loans at the root of the foreclosure crisis, delinquencies have accelerated on loans extended to borrowers with better credit.

That indicates that more traditional drivers of foreclosure, particularly unemployment, are beginning to drive foreclosures among borrowers who owe more than their homes are worth.

The delinquency rate for mortgages on one-to-four unit properties reached 9.24% of all loans in the second quarter, up from 9.12% in the first quarter and 6.41% one year ago. The April-to-June delinquency level is the highest since the MBA began its survey in 1972. (The delinquency rate includes loans that are late on at least one payment, but not loans that are in foreclosure).

The foreclosure rate rose to 4.3% of all loans, up from 3.85% in the first quarter. The rate of foreclosure starts increased most rapidly for prime fixed-rate loans, followed by loans backed by the Federal Housing Administration.

While the quartet of sand states—Florida, Nevada, Arizona, and California—accounted for 44% of all new foreclosures during the second quarter, their share of foreclosure fell from 46% in the first quarter.

In this market, condo buyers are drumming up new strategies to back out of deals gone wrong.

In the Journal today, I report that some buyers of condos in hotels are trying to get courts to rule that the units were sold as investments and should therefore be subject to Securities and Exchange Commission regulation, which would force companies to issue a detailed prospectus and have agents licensed to sell both real estate and securities, a rare combination. The buyers are asking that their contracts be voided and sales rescinded.

It remains to be seen how successful that effort will be. One thing is for sure: It isn’t the only path buyers are using in an attempt to unwind purchases gone wrong.

The WSJ’s Tamara Audi reported last month on a group of buyers at Las Vegas’ City Center who are using the blogosphere as their tool, airing grievances—and demanding that purchase prices be adjusted to reflect current real estate values. Property values in the market have slipped some 30% in the last year.

In another Vegas case, condo-hotel owners are arguing not that their units are securities, but has simply breached their contract, saying a developer has failed to properly market rentals and isn’t sharing revenue as promised, the Las Vegas Sun reports. Lawyers for the developers say it’s just another example of buyer’s remorse.

But while plaintiffs and defendants alike are hunkering down for lengthy court battles or arbitration, the Los Angeles Times reported last week on some San Diego buyers who are luckier: the developer of a tower there decided to refund deposits and turn condo units into rentals until the market improves.

Home price declines may be luring more home buyers back to the market, but they’re also leaving more American homeowners with negative equity.

Some 24% of owner-occupied homes had mortgage debt that exceeded the values of those homes at the end of June, according to data from Equifax and Moody’s Economy.com. That number rises to 32% when looking at the share of homeowners with mortgages that don’t have equity left in their homes.

Overall, 16 million homeowners are “upside-down” on their mortgages, up from 10 million, or 15% of owner-occupied homes, one year ago.

Nearly 10% of owner-occupied homes now have mortgage debt with loan-to-value ratios of at least 125%, and roughly half of those homes have mortgage debt with loan-to-value ratios of 150% or more.

The rising share of homeowners without equity and the foreclosure crisis continues to be the biggest storm cloud facing any possible economic recovery, says Mark Zandi, chief economist at Moody’s Economy.com. “That such a high proportion of homeowners are underwater is testimony to the severity of the foreclosure crisis and the risk that it still poses to the broader economy,” he said.

To date, most foreclosure-rescue efforts have focused on lowering monthly payments by reducing interest rates, in part because the housing crisis began with mortgages that were resetting to higher payments. But the looming negative-equity problem could put more pressure on policymakers to come up with a modification plan that includes reducing loan balances, and not just lowering interest rates.

“The modification plans that they have in place … will become increasingly ineffective as more homeowners fall deeply underwater,” says Mr. Zandi.

Unsurprisingly, the negative equity issue remains most severe in the sand states. Some 40% of owner-occupied homes in Nevada are underwater, followed by Arizona (37%), California (33%), and Colorado (31%).

Click on the column headers to sort the chart below.

Source: Moody’s Economy.com

Mortgage rates are bouncing around, but struggling to find their way back to the 50-year lows that they reached earlier this year.

Rates on 30-year fixed-rate mortgages fell to 5.17% last week down from 5.36% the week before, according to the Mortgage Bankers Association’s weekly survey of mortgage applications. That helped boost the MBA’s refinance index by 7.2% from the previous week, while the purchase index increased by 0.9%.

Refinance activity accounted for 54% of mortgage applications, up slightly from 52.6% the week before.

When mortgage rates fell to record lows in March, April and May, the share of adjustable-rate mortgages fell to around 3%, but as rates have edged up this summer, more borrowers have looked into ARMs, which can offer lower rates in the short term but could reset higher in coming years.  The share of ARM activity ended last week at 5.4%.

Mortgage rates measured by HSH.com, a financial publisher, have hovered around 5.3% in recent weeks.  Average rates on conforming 30-year mortgages ended at 5.42% last week, up from 5.33% in mid-July. Averages rates on jumbo mortgages, meanwhile, ended last week at 5.33%.

The Treasury Department released the first wave of data that shows how many loans that mortgage servicers have modified under the Obama administration’s effort to help at-risk homeowners. Around 9% of eligible borrowers have received modifications, and Treasury said that servicers’ performance has been “uneven.”

Treasury last week convened a meeting of 25 mortgage servicers to encourage them to ramp up the program. But, in a statement on Friday, Rep. Barney Frank, the Massachusetts Democrat who chairs the financial services committee, threatened to revisit “cram-down” legislation if banks don’t step it up. That legislation, which the House passed earlier this year but which couldn’t get through the Senate, would allow bankruptcy judges to rewrite mortgage contracts when homeowners file for bankruptcy.

“[I]f this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong,” Frank said.

While the President has continued to express support for bankruptcy legislation, administration officials say they’d rather focus on getting the modification program working at full speed.

“If that’s the only option left, then [bankruptcy] might be appropriate in some cases. But if we can reach people with modifications, as we are doing now, that is a much better outcome for homeowners than bankruptcy,” said Michael Barr, Treasury’s assistant secretary for financial institutions.

Mr. Barr says he doesn’t believe that the political climate—which he said was “pretty rough” earlier this year towards so-called “cramdown” legislation—has improved. “We don’t have any indication those politics have changed significantly, and our focus really has been on trying to make sure we reach as many borrowers as we can with the modification program,” Mr. Barr said in an interview.

Likewise, James Lockhart, who heads the government agency charged with overseeing government-controlled mortgage-finance companies Fannie Mae and Freddie Mac, says he doesn’t see a need for revisiting bankruptcy overhaul legislation. “We shouldn’t make people have to go through bankruptcy to get their mortgages modified or refinanced,” he said on Monday. “The modifications are starting to ramp up.”

Instead, the current approach to hold servicers feet to the fire includes releasing more public information about which servicers are and aren’t modifying loans. Treasury said Tuesday it will release monthly transparency reports. (See the list released today.)

Meanwhile, Freddie Mac has been put in charge of auditing servicers to assess whether rejected modifications were done properly, and some borrowers who were improperly rejected may get a second chance.

Treasury could withhold payments or fine servicers who violate their contractual commitments under the modification program.

Yet another source sees Phoenix rising from the ashes: The median home-resale price increased $5,000 to $125,000 in June–the first gain in two years–buoyed by desperate owners opting for short-sales to avoid foreclosure, according to Fidelity National Title Insurance Co. of Maricopa and Pinal Counties.

Both June and July saw an increase in the number of short sales, or the lender letting the borrower unload the home for less than what’s owed, according to the report. July’s 237 closed deals were an eye-popping 2,270% increase over the year earlier’s 10.

The news follows MDA DataQuick, which recently said the desert city in June posted its strongest existing-sales numbers in four years, with median prices ticking up for the second month in a row.

Some brokers, and Developments commenters, report bidding wars as investors flush with cash look to snap up bargain-priced units in a market that has seen prices plunge by more than half from its peak. So far, recovery has been strongest in communities including Avondale, Glendale, Maricopa and south and west Phoenix–areas last year plagued by a glut of lender-owned homes.

But the improvement appears limited to lower-priced single family residences. As is the case nationwide, declines continue for properties above $350,000 as well as condos and mobile homes, says Michael Orr, founder of The Cromford Report, which tracks the region’s trends. Indeed, price erosion continues in Scottsdale, brimming with high-end homes and condos.

While any whisper of recovery is exciting news in one of the nation’s most battered boom-to-bust markets, no one’s celebrating just yet.

The typical spring selling season could be boosting sales, as could the federal tax credit offering first-time buyers up to $8,000 for deals done before Dec. 1. Financing remains tough to secure, while elevated interest rates are eating into affordability.

And foreclosures are expected to climb as unemployment mounts. That’s the last thing the state needs: For the first half of the year, it saw the nation’s second-highest foreclosure rate, with one in every 30 homes slapped with at least one filing, according to RealtyTrac.

Tougher financing, rising unemployment, loan recasts and would-be trade-up buyers who’ve lost equity in their own homes: high-end housing markets have all the ingredients for a substantial price correction over the coming months, as today’s WSJ story notes.

Most housing analysts expect housing markets at the bottom end of the price scale to see the sharpest price declines, because those markets generally saw the most dramatic price appreciation. But a handful of expensive-home markets are already showing price declines that outpace their broader market.

Financial-data firm Fiserv provided a list of home price declines by zip-code, and a handful of the nearly 250 with median prices above $550,000 saw price declines in the 12-month period ending in March that outpaced those for their metro area.

The New York suburb of Tenafly, N.J., topped the list, with a nearly 18% price decline at the end of March from one year ago. The New York-Northern New Jersey metro area, meanwhile, posted a 12.4% decline over that period. Price declines also outpaced the broader market in Riva, Md., a Baltimore suburb where prices were down 16% and Beach Haven, N.J., down 15%.

Other cities that have fallen faster in recent months than their broader market include Rockville Centre, N.Y.; Cambria, Calif.; Darien, Conn.; and two zip codes each in Bethesda, Md., and San Luis Obispo, Calif.

Unsurprisingly, the hardest-hit bubble markets generated the largest 12-month declines for pricey neighborhoods.  Paradise Valley, Ariz., with a $1.5 million median home price, posted a 32.4% decline in the year ending in March. (Still, that was a slight improvement over the Phoenix metro area’s 35.7% decline.)

Other biggest losers: Fort Lauderdale, Fla., dropped by 27% whie Miami’s 33143 and 33146 zip codes and Carmel, Calif., posted declines of around 26%.

There was some hope of a recovery in certain U.S. housing markets this week. But the situation in many of Florida’s hardest-hit markets still remains rather hopeless.

A new report from LPS Applied Analytics shows that Florida was home to 19 of the top 20 housing markets with the most foreclosure inventory in June. Florida took the top 18 spots, with Cape Coral-Fort Myers, Miami, and Clewiston leading the list. Only Merced, Calif., at No. 19, kept Florida from owning the top 20.

Florida’s inventory problem was worse than other hard-hit markets in California, but housing anaylsts also note that it’s inventory problem has been weighed down by laws that require courts to process foreclosures, which slows down the foreclosure process.

Meanwhile, the oversupply of condos is so severe in Fort Myers that one family remains the sole occupants of a 32-story luxury condo tower in the city’s downtown. The News-Press of Fort Myers offered this gem when it profiled Victor Vangelakos, who with his wife and three kids are the only residents in the Oasis I condo.

The News-Press writes that the 45-year-old Weehawken, N.J., firefighter bought the condo from Miami-based The Related Group for $430,000 in November, and had planned to use it as a second-home until retiring there in a few years. Sales were so poor in the Oasis I that Related tried to move most of the buyers into the adjacent Oasis II, but Mr. Vangelakos’s lender wouldn’t agree to the swap.

It seems that there’s always an odd-man out like this during a building boom. In a story on San Diego’s condo bust, the Los Angeles Times reminded readers about Michael Berg, who was the only resident of San Diego’s41-story twin-tower One Harbor Drive condo complex from 1993 to 1995.

Mr. Berg became a “local legend,” the Times writes, after the local paper ran a front-page feature on the lawyer, who said that he sometimes took the trash out in the nude because he had no neighbors.

This week we learned that the administration of New York City’s mayor Michael Bloomberg pays to fly homeless families one-way out of the city, and that the housing slump might be “easing.” Here’s what was happening at the higher recesses of the market:

Karl Rove lists his Federal-style home in Washington, D.C., for $1.585 million in order to relocate to Texas. Built in 1968, the 4,529-square-foot house has five bedrooms and four-and-a-half bathrooms. Mr. Rove bought it in 2001 for $799,000. (Zillow)

Dr. Conrad Murray, Michael Jackson’s personal physician, could face foreclosure on the Las Vegas home that authorities searched in a manslaughter investigation about the pop star’s death. Dr. Murray made his last $15,000 payment on the property in January, and he has since accrued more than $100,000 in debt plus penalties. (USA Today)

Celebrity Nascar driver Jimmie Johnson lists his condominium in New York’s Chelsea neighborhood for $4.4 million. Mr. Johnson paid $3.98 million for the 3,200-square-foot loft in 2007. Located in a doorman building with a private gym, the home has three beerooms and three-and-a-half bathrooms. Mr. Johnson and his wife, Chandra, have a primary residence near Charlotte, N.C. More photos (WSJ)

Actress Melissa Joan Hart sells her Los Angeles home for nearly $2.5 million. The Spanish-style house in the city’s Sherman Oaks area measures 4,911 square feet and has five bedrooms and five bathrooms. Ms. Hart put the home on the market for $3.25 million in October and later reduced the price to $2.85 million (Los Angeles Times)

DreamWorks producer David Lipman lists his home in Los Angeles’s Hollywood Hills for $2.195 million. Designed by architect Merle Roussellot and built in 1961, Mr. Lipman bought the classic midcentury house in 2000 for $678,000 and renovated it. It has two bedrooms and two bathrooms, as well as a koi pond and a pool. (Los Angeles Times)

Bruce Livingstone, the founder of stock-photography provider iStockphoto, pays $2.5 million for a landmark midcentury Los Angeles home. Located on a slope in the Los Feliz community, the home was built in 1966 for Dr. George Jacobson, a professor of medicine at the University of Southern California, and his wife Miriam. The two-story home measures 3,000 square feet and has walls of glass and brick, an atrium, a pool and city views. Mr. Livingstone bought the home in all-cash deal, including much of the artwork and furnishings. Photos (WSJ)

Tom Beasley, a Nashville lawyer who co-founded Corrections Corp. of America in 1983, lists a 2,100-acre ranch in Tennessee for $10 million. The property includes a 5,500-square-foot house that is linked by a breezeway to a three-bedroom guest apartment. It also has two barns and 15 spring- and river-fed ponds. Click here to see photos of the property. (WSJ)

James L. Ferraro, a Miami trial lawyer who owns the Cleveland Gladiators arena football team, buys a Manhattan penthouse in the Park Imperial  for $8.175 million. Mr. Ferraro also has a home in Miami, as well as a 14-bedroom home on Martha’s Vineyard. (New York Observer)

Roberta Campbell, the ex-wife of software giant Intuit’s chairman of the board William Campbell, buys a four-bedroom apartment in Manhattan for $17.5 million. The seller, Paula Lascano, paid $14.2 million for the 3,840-square-foot home in March 2008. The apartment first hit the market in April 2008 lsited at $22.95 million. The price was cut five times, bottoming out at $18.5 million in March 2009. (The Real Deal)

This week we learned that the administration of New York City’s mayor Michael Bloomberg pays to fly homeless families one-way out of the city, and that the housing slump might be “easing.” Here’s what was happening at the higher recesses of the market:

Karl Rove lists his Federal-style home in Washington, D.C., for $1.585 million in order to relocate to Texas. Built in 1968, the 4,529-square-foot house has five bedrooms and four-and-a-half bathrooms. Mr. Rove bought it in 2001 for $799,000. (Zillow)

Dr. Conrad Murray, Michael Jackson’s personal physician, could face foreclosure on the Las Vegas home that authorities searched in a manslaughter investigation about the pop star’s death. Dr. Murray made his last $15,000 payment on the property in January, and he has since accrued more than $100,000 in debt plus penalties. (USA Today)

Celebrity Nascar driver Jimmie Johnson lists his condominium in New York’s Chelsea neighborhood for $4.4 million. Mr. Johnson paid $3.98 million for the 3,200-square-foot loft in 2007. Located in a doorman building with a private gym, the home has three beerooms and three-and-a-half bathrooms. Mr. Johnson and his wife, Chandra, have a primary residence near Charlotte, N.C. More photos (WSJ)

Actress Melissa Joan Hart sells her Los Angeles home for nearly $2.5 million. The Spanish-style house in the city’s Sherman Oaks area measures 4,911 square feet and has five bedrooms and five bathrooms. Ms. Hart put the home on the market for $3.25 million in October and later reduced the price to $2.85 million (Los Angeles Times)

DreamWorks producer David Lipman lists his home in Los Angeles’s Hollywood Hills for $2.195 million. Designed by architect Merle Roussellot and built in 1961, Mr. Lipman bought the classic midcentury house in 2000 for $678,000 and renovated it. It has two bedrooms and two bathrooms, as well as a koi pond and a pool. (Los Angeles Times)

Bruce Livingstone, the founder of stock-photography provider iStockphoto, pays $2.5 million for a landmark midcentury Los Angeles home. Located on a slope in the Los Feliz community, the home was built in 1966 for Dr. George Jacobson, a professor of medicine at the University of Southern California, and his wife Miriam. The two-story home measures 3,000 square feet and has walls of glass and brick, an atrium, a pool and city views. Mr. Livingstone bought the home in all-cash deal, including much of the artwork and furnishings. Photos (WSJ)

Tom Beasley, a Nashville lawyer who co-founded Corrections Corp. of America in 1983, lists a 2,100-acre ranch in Tennessee for $10 million. The property includes a 5,500-square-foot house that is linked by a breezeway to a three-bedroom guest apartment. It also has two barns and 15 spring- and river-fed ponds. Click here to see photos of the property. (WSJ)

James L. Ferraro, a Miami trial lawyer who owns the Cleveland Gladiators arena football team, buys a Manhattan penthouse in the Park Imperial  for $8.175 million. Mr. Ferraro also has a home in Miami, as well as a 14-bedroom home on Martha’s Vineyard. (New York Observer)

Roberta Campbell, the ex-wife of software giant Intuit’s chairman of the board William Campbell, buys a four-bedroom apartment in Manhattan for $17.5 million. The seller, Paula Lascano, paid $14.2 million for the 3,840-square-foot home in March 2008. The apartment first hit the market in April 2008 lsited at $22.95 million. The price was cut five times, bottoming out at $18.5 million in March 2009. (The Real Deal)