The delinquency rate on loans for one- to four-unit residential properties jumped 23 basis points above the third quarter of 2007 and 87 basis points above the fourth quarter of 2006, the association said.

On a seasonally adjusted basis, 0.83 percent of loans entered foreclosure proceedings during the quarter, the report said, and the total delinquency rate is at it highest level since 1985.

"The rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever," the report said.

California and Florida held a disproportionate rate of delinquent accounts, the report said, with 21 percent of all the loans in the country and 30 percent of the foreclosure starts. But, Michigan, Ohio and Indiana continue to have the highest statewide percentages of loans in foreclosures, the report said.

"Declining prices are clearly the driving factor behind foreclosures but the reasons and magnitude of the declines differ from state to state," the association's chief economist Doug Duncan said.