WASHINGTON -- Relentlessly rising unemployment is triggering more home foreclosures, threatening the Obama administration's efforts to end the housing crisis and diminishing hopes the economy will rebound with vigor.
In past recessions, the housing industry helped get the economy back on track. Home builders ramped up production, expecting buyers to take advantage of lower prices and jump into the market. But not this time.
These days, homeowners who got fixed-rate prime mortgages because they had good credit can't make their payments because they're out of work. That means even more foreclosures and further declines in home values.
The initial surge in foreclosures in 2007 and 2008 was tied to subprime mortgages issued during the housing boom to people with shaky credit. That crisis has ebbed, but it has been replaced by more traditional foreclosures tied to the recession.
Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982.
But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn't a drag on the economy, and when the recession ended, the boom was explosive.
No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.
"It just doesn't have the makings of a recovery like we saw in the early 1980s," says Wells Fargo Securities senior economist Mark Vitner, who predicts mortgage delinquencies and foreclosures won't return to normal levels for three more years.
Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments -- the highest levels since the Great Depression.
Because home values have declined so dramatically, many people can't refinance. They owe far more to the bank than their properties are worth.
To combat the foreclosure crisis and help stabilize home prices, President Barack Obama launched an effort in March to help 9 million people avoid foreclosure by helping them refinance or modifying their loans to lower their payments.
But that's of no help to people who can't even afford the lower payments because they're making much less money or have lost their jobs altogether.
As of early July, about 160,000 borrowers were enrolled in three-month trials of loan modifications under the plan, according to preliminary figures from the Treasury Department.
Meanwhile, more than 1.5 million American households were threatened with losing their homes in the first six months of this year, foreclosure listing service RealtyTrac Inc. said Thursday.
Last week, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan outlined their frustrations in a letter to 25 mortgage companies, saying the industry needs to "devote substantially more resources to this program for it to fully succeed."
While high-level pressure on the mortgage industry could help, "There's nothing there that's going to help people who don't have jobs," said Jay Brinkmann, chief economist with the Mortgage Bankers Association.
Just ask anyone in Rockford, Ill. Over the last generation, the blue-collar city of about 157,000 northwest of Chicago has struggled to attract jobs as auto suppliers, aerospace companies and machine shops closed. Today, unemployment runs at more than 13 percent.
Robin and Thomas Lewis, who live there, once earned a combined $100,000. But he lost his job in shipping and receiving at a robotics company, and she had to close her at-home day care business. They are staring at an October deadline for foreclosure.
Their water service was cut off in February because they couldn't afford to pay the bill. Since then, they and their two teenage sons have been showering at the homes of friends and family and filling up gallon jugs of water to drink at home.
Robin Lewis, 41, found a job as a cashier at Wal-Mart and is taking night classes in hopes of becoming an accountant. Her 43-year-old husband got a job through a temp agency working as a machine operator.
"At least now we have some income coming in," Robin Lewis said.
She hopes it's enough to persuade the mortgage company to modify their 30-year fixed-rate loan. They are meeting with a housing counselor next week to work on their application for a loan modification.
Around the country, the relationship between rising unemployment and foreclosures is growing. An Associated Press analysis of more than 3,100 U.S. counties found a much stronger link between foreclosure rates and unemployment this year than in 2007.
According to April figures, some of the highest unemployment rates in the country are in California cities like Merced, Modesto and Fresno that have been struck hardest by the foreclosure crisis. In those areas, home prices have been cut in half.
Even in areas where unemployment is lower, borrowers are struggling.
Claudia Escobar, a 44-year-old single mother in Clifton, Va., lives in a cozy three-story brick town house on a tree-lined suburban street about 25 miles west of the nation's capital.
A combination of family health problems and the loss of her $50,000-a-year job at an accounting firm have made it impossible to make her $900 mortgage payment.
She has staved off foreclosure so far and hopes to land a job while her lender evaluates her application for a loan modification. Her 14-year-old son, Tommy, broke down in tears when he found out that his mother lost her job.
"That has to be the most devastating point since we lived here," she said, sobbing. "He keeps asking me every now and then if we're going to lose the house."
Webber contributed to this report from Rockford, Ill. Associated Press Writer Mike Schneider in Orlando, Fla., contributed to this report.