During the second quarter of this year, the delinquency rate (at least one month overdue) on residential mortgages (defined as those whose payments are at least one month overdue) hit an all-time high of 6.4%, according to the Mortgage Bankers Association. Nearly 3% of all outstanding mortgages were in foreclosure.

However, these national figures don’t really tell the story. While choking on credit card debt is a nationwide problem, mortgage difficulties are primarily concentrated in six states: California, Colorado, Florida, Nevada, Ohio, and Michigan.

The first four areas are suffering from the glut of overbuilding and greed we saw a few years back. Buyers included speculators intending to turn a quick buck, as well as those intending to occupy the residence. Both were so anxious to grab a house, they were willing to pay just about any price and often funded the purchase with adjustable rate mortgages.

As we’ve learned form the subprime debacle, lenders often bent the rules and issued loans to folks who were bound to be unable to make their payments if interest rates went up. When that happened, new buyers disappeared and housing prices plunged, leaving many owners with mortgages they can’t afford on homes worth far less than they paid.

A different set of factors is at work in Michigan and Ohio. Both of these Midwest states have been hard-hit by the downturn in the U.S. auto industry. Plant closings and layoffs mean incomes have been severely reduced. People simply cannot afford to make their mortgage payments any more.

Regardless where you live, if you’re finding it difficult to pay your mortgage, the first step is to contact your lender. Your goal is to see if you can get them to either lower your interest rate or re-negotiate the terms of your loan.

Frankly, lenders report being swamped by these requests, so you’ve got to be your own advocate.

While you’re waiting to hear from the mortgage company, call the “HOPE Now” hotline: (888) 995-HOPE. It’s part of the Federal Housing and Economic Recovery Act that was signed into law by President Bush this year. The Act created the Hope for Homeowners (H4H) program, which kicked off Oct. 1^st. The government estimates that as many as 400,000 homeowners could receive relief in the form of lower, more affordable loans.

Speculators need not apply. If you bought at the peak of the housing bubble intending to “flip” the home in six months and reap a profit, you’re on your own. The Federal Housing Administration makes it clear that H4H is designed for owner-occupied residences.

If you qualify, you will be able to borrow as much as $550,440 via a 30-year, fixed rate mortgage. But whatever your loan amount, the first criteria is that you can realistically afford it. The following must also be true:

    1. You took out your current mortgage before January 1, 2008

    2. You did not lie or falsify information in order to get your original mortgage

    3. You did not intentionally default on your payments

    4. You have not been convicted of fraud in the past 10 years

    5. Your payment is greater than 31% of your gross monthly income

    6. You do not own any other residential real estate

You can learn more about the Hope for Homeowners program at http://www.hud.gov/fha/home080730.cfm. Click on the link for your state to get started. 

Or, call the HOPE Now Hotline, which will put you in touch with trained counselors in your area. They can help you explore your options.

The newly-passed Emergency Economic Stabilitzation Act (EESA) expands eligibility under the H4H program and gives federal agencies more tools and money to assist families keep their homes. It also  directs federal mortgage agencies to modify the loans that they own or control.

If you’re feeling overwhelmed by debt in general, consider signing up with a nonprofit credit counseling service. In exchange for agreeing to a budget plan, they’ll contact creditors for you. As I wrote in a previous column, due to the number of for-profit scammers out there, look for an organization affiliated with the National Foundation for Credit Counseling (nfcc.org).

But don’t expect a miracle.  

“Counseling isn’t for everyone,” says Travis Plunkett with the Consumer Federation of America.  He says that while a credit counseling agency “can provide some breathing room” by negotiating reduced payments with your creditors, “if you’re really in serious financial trouble, they can’t provide enough breathing room to help.”

Both Plunkett and Gerri Detweiler, author of several books on consumer credit, say that if your situation is especially dire, filing for bankruptcy may be your one recourse.  If you think you might be headed down that path, Detweiler recommends making an appointment with a bankruptcy attorney as soon as possible.

However, you’re probably not going to be able to simply way away from your home and leave your lender holding the bag.   She cautions that “simply turning in your keys is not going to cut it. You may still be on the hook for the difference between the loan amount and what the house is worth.”

Moreover, new bankruptcy regulations passed in 2005 spell out exactly the type of bankruptcy for which you qualify.  Far fewer individuals can opt for chapter 7, where you are essentially absolved of almost all of your debts.  Most will have to file under Chapter 13, which requires you to pay back much of what you owe.

In addition, under either type of bankruptcy, you must complete a credit counseling course given by a federally-approved organization.  And your bankruptcy filing will remain on your record for 10 years.

If you feel your current financial problems are temporary and you really, really want to hang on to your home, don’t give up.  “The challenge is what when you’re under financial stress, it’s harder and harder to make the calls, handle the rejections, and be willing to keep going,” says Detweiler.  As she put it, you have to “be a bulldog about it.”