The number of foreclosures hit a record high in 2007, with more homeowners falling behind on their mortgage payments, the Mortgage Bankers Association reported Thursday.

By the end of last year, two percent of all U.S. mortgages were in foreclosure, with 0.83 percent of loans entering the foreclosure process in the fourth quarter alone, the Washington D.C.-based trade group said. At the same time, nearly six percent of mortgages were past due, the highest delinquency rate since 1985. Subprime mortgages represented as much as seven percent of all outstanding loans, compared to 15 percent of prime loans.

California and Florida accounted for 21 percent of all outstanding loans last year, along with 30 percent of mortgages entering foreclosure. Michigan, Ohio and Indiana had the highest overall percentages of foreclosures, but showed signs of easing in the months ahead.

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

Duncan said job losses and tighter credit conditions in Ohio, Michigan and elsewhere were leading to a lower demand for homes, leaving sellers with fewer potential buyers. Meanwhile, overbuilding in California, Florida, Nevada and Arizona had created a glut of housing inventory that would take time to work through, he added.