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By Dan Ferris in the S&A Digest:

"Foreclosures were bad last year? It's going to get worse," University of Wisconsin professor Morris A. Davis told the New York Times. And this time, the problem lies within the more numerous and more creditworthy prime loans. Economists are referring to this next round of foreclosures as the "third wave," different from the first round, when speculators dumped property because of plunging prices, and the second wave, when subprime borrowers' introductory interest rates reset.

Now, due to layoffs, creditworthy and conservative borrowers simply can't afford their mortgage payments. Moody's macro website, Economy.com, predicts 60% of all mortgage defaults this year will be caused primarily by unemployment - up from 29% last year.

According to the NYT:

From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

Over the same time period, subprime mortgages in those three categories only increased by 14,000, to 1.65 million. Alt-A loans increased 159,000 to 836,000. In total, more than 4 million loans worth $717 billion were in the three distressed categories in February - up more than 60% from last year.

And what is the government doing to combat the problem? In February, OBAMA! announced a $75 billion program to reduce payments for troubled borrowers, which would spare 4 million homeowners. Three months later, the number of modified loans is "more than 10,000 but fewer than 55,000," according to a Treasury spokesperson. Meanwhile, another 313,000 homes entered foreclosure.