More Minnesota homeowners struggled to make mortgage payments in February, according to new data from First American CoreLogic.

In the Twin Cities metro area, 2 percent of outstanding mortgage loans were in foreclosure in February, an increase from a 1.4 percent foreclosure rate in February 2009. The number of people 90 or more days behind on their mortgage payment also increased. This February, 6.3 percent of mortgage loans were delinquent compared with 4.6 percent for the same period last year.

Scott Anderson, senior economist for Wells Fargo, isn't surprised. "The main variable that drives delinquencies is the unemployment rate, and it's still near 30-year highs," he said. We've come down a little bit in the Twin Cities from the peak last year, but we're really not seeing it show up yet."

Jeff Crump, associate professor of housing studies at the University of Minnesota, has been expecting foreclosures in 2010 to shift more from the inner city to the suburbs. He blames option ARM mortgages that enabled families to stretch to buy their dream home by only paying interest.

17 percent underwater

About 17 percent of Minnesotans owed more than their home is worth at the end of 2009. Some can't afford to continue paying, and some don't want to.

"The bottom line is that to keep people in their homes who are currently underwater -- i.e., owing more than their house is worth -- there needs to be some sort of principal reduction," Crump said. Revisions to the government's new loan modification program announced in March will offer financial incentives to lenders that write down the principal on some loans.

Last year, 23,019 homes went into foreclosure in the state -- 14,459 of those took place within the Twin Cities metro, according to a report by the Minnesota Homeownership Center. Center spokesman Ed Nelson expects similar numbers this year.

"We're looking at tens of thousands of people that are still going to fall into foreclosure and 50,000 to 60,000 people, according to the pre-foreclosure notice numbers that we saw in 2009, that are struggling with mortgage payments," he said.

Kara McGuire • 612-673-7293