A total of 642,150 foreclosure filings -- from notices of default to bank repossessions -- were reported in 2007's fourth quarter. That represents a 1% increase from the previous quarter and an 86% boost from the fourth quarter of 2006.

The number of foreclosures is expected to increase steadily through the second half of this year, when the next wave of subprime adjustable-rate mortgages (ARMs) -- the industry's worst-performing loans --  is expected to reset.

Until these low-quality loans work their way through the system, Sharga says, there's no reason to expect the number of foreclosure filings to drop.

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Nevada, Florida, Michigan lead the pack

While foreclosure filings totaled more than 2 million in 2007, the number of properties in trouble rose to 1.3 million, up 81% from the 717, 522 homes in foreclosure in 2006. (Some homes have more than one loan out on them.) More than 1% of all households were in some phase of the foreclosure process last year, up from just over 0.5% in 2006. Government aid has yet to help

RealtyTrac estimates that between half a million and three-quarters of a million bank-owned properties in the U.S. will return to the market this year.

December's surge in foreclosure filings suggests that state intervention efforts have yet to make a dent in the problem. The bailout program announced in December by Treasury Secretary Henry Paulson did not affect these numbers, as it did not include borrowers already in default. (Read more on who qualifies for the bailout.

Still, activists don't hold out much hope that that program will turn the tide of foreclosures either, mainly because many homeowners won't qualify to have their loans refinanced. Moreover, the program is voluntary and doesn't require lenders to report the outcomes of their discussions with troubled borrowers. (Read more on why the plan is being called inadequate.

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The Center for Responsible Lending (CRL) estimates that the Paulson program will help only about 118,200 U.S. borrowers, or about 3% of the outstanding subprime mortgages with adjustable interest rates. "Even if it's up and running as best as can be, it's not going to stem the tide, says Kathleen Day, CRL spokeswoman.

Refinancing gets bogged down

State-run counseling and refinance programs are encountering some of the same problems borrowers are in getting workouts done.

Brian Hudson, director of Pennsylvania's Housing Finance Agency, says he has been able to refinance 29 loans since launching a program to refinance struggling homeowners last October. The agency has another 300 loans that are being reviewed as part of a separate campaign which seeks to work out loans in which the borrower owes more than the house is worth. However, resolving these cases with servicers and investors has been difficult.

"I'm frustrated in that it's tough to get some decisions quickly when you may have a sheriff's sale in a week or two," Hudson says.

The CRL says that for every loan modification done on a subprime adjustable-rate mortgage -- those mortgages at the root of the current crisis -- foreclosures outnumber it 13 to 1.

Calling the market low is a difficult task, and it's most often spotted in the rear-view mirror. For one thing, there's no agreement on when the U.S. real-estate market will officially touch bottom. If you believe the National Association of Realtors, it will happen later this year. Investment bank Merrill Lynch is much more pessimistic, predicting that U.S. home prices will drop another 15% this year and 10% in 2009, with perhaps even more depreciation in 2010.

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