Since losing her sales job at a local tree company in November, Sharon Torberg has exhausted her savings and cashed in her retirement accounts, but remains two months behind on her mortgage.

Struggling with a respiratory problem that keeps her homebound, she faces the possibility of losing the 1920s house in Minnetonka where she has lived happily for 27 years. But even if she sells her home to avoid foreclosure, it likely wouldn't fetch what she owes on it.

"They say the market is getting better," said Torberg, 62. "But I'm not seeing it."

Beneath the hoopla over the burgeoning housing recovery, thousands of Minnesotans and millions of homeowners across the country are still struggling to make their mortgage payments, putting them on the cusp of foreclosure at rates stubbornly higher than before the market crashed.

Nearly 10,000 homeowners across the state received a preforeclosure notice during the first three months of the year — a troubling 34 percent increase over the previous quarter, according to the Minnesota Homeownership Center. While fewer Minnesotans are losing their homes than they were two years ago, the economic recovery has failed to lift many beleaguered homeowners.

"It's still a crisis," said Sandi Kleist, a financial counselor for Lutheran Social Service in Brainerd. "It feels like everyone is living on the edge."

Though house prices are on the rebound and unemployment rates have fallen, the personal finances of homeowners across the country aren't improving at the same pace. Unemployment is cited as the primary culprit, while those who have managed to get rehired aren't making enough to recover from the financial blows when they were jobless.

"Most folks that are obtaining new jobs are taking significant pay cuts," Kleist said.

Richard Parkos, for example, lost his job in late 2011 and quickly fell behind on his mortgage payments. Though he found a job in just six weeks, his hourly wage is $5 per hour less than he was earning before.

"I was already living on a tight budget, and that made it worse," said the 55-year-old maintenance technician. "I just couldn't make the payments."

After the loan fell into default, a sheriff's auction was scheduled for June. Parkos asked his lender to adjust the terms of his mortgage to make it more affordable. He was rejected the first time, but got temporary approval after a second attempt.

"I was ecstatically happy," he said. "For once, something worked for me."

Such struggles persist despite a dramatic turnaround in the housing market. Home prices in the Twin Cities and beyond have risen at double-digit rates for much of the past year as the number of sales continue to climb. Still, those gains haven't been strong enough to lift thousands of Minnesota homeowners out of negative equity. During March, nearly one in five Twin Cities homeowners — or nearly 100,000 households in the metro — owed more than their house was worth, according to CoreLogic.

The situation is particularly hopeless for Minnesotans like Ashley and Troy Yantes, who bought a townhouse in Savage in 2006 when the housing market had peaked. As the recession took hold, Troy lost his job, while Ashley was laid off on two occasions. They fell behind on their mortgage payment, which kept rising because they had an adjustable-rate mortgage.

Their house payment is now $400 more than it was when they bought it. But the townhouse is worth nearly $100,000 less.

"People are building five-bedroom houses that cost less than our than ours does," said Ashley Yantes. "And we could be there for 10 more years and never get out of it what we've paid."

While both have gotten jobs, they aren't making as much as they were before the Great Recession. They are trying to negotiate a short sale with their bank, but the deal has languished for almost a year.

"Now I feel like we should have just rented, because now we're in this huge mess that we can't seem to get out of," Ashley Yantes said.

Indeed, despite recent increase in home prices, more 14 million homeowners across the country — or one in four people with a mortgage — are still making payments on financing that exceeds the value of their homes by more than $1 trillion, according to Zillow.

"Negative equity will remain a major factor in the market for the foreseeable future," said Zillow's chief economist, Stan Humphries.

For many, the best hope of relief is a loan modification that will adjust the terms of their mortgage to make their monthly payments more affordable. Those borrowers, however, are at the mercy of their lender and the seemingly endless number of people who are in charge of processing those requests.

And as Minnetonka's Torberg knows all too well, that can be a tedious, emotionally draining process. Several months ago, she applied for loan modification, and each time she's called to get an update, she's been referred to a different case manager who asks her to call back for another update. The outcome is still uncertain, and so she's working on coming to terms with the reality that she and her disabled adult son might have to move to a rental.

"My kids were born and raised here," she said. "And it'll be tough to leave."

Thousands of Twin Cities homeowners have already been through that devastating process, and have gone through the short sale process or lost their home to foreclosure. Nearly one in three home sales last month was a distress sale.

And Wendy Haisley doesn't expect the situation to get better any time soon. She's a legal assistant for Markve & Zweifel, a local law firm that specializes in short sales. To meet demand, she's watched the company grow from two employees to 18 in just three years, and growing number of calls are from people who through not fault of their own can no longer make that monthly mortgage payment.

"They can't afford the home they could afford before the recession," she said. "There are still a lot of people in trouble."

Jim Buchta • 612-673-7376