Of all of the foreclosures in the RealtyTrac online database, less than 50% have mortgages worth less than what is owed, said Rick Sharga, senior vice president at RealtyTrac, during a session at REO Expo, which concludes in Dallas Wednesday. The RealtyTrac database covers foreclosure filings from notice of default to REO properties across more than 2,200 counties in the US. Sharga said while underwater borrowers are beginning to explore the possibilities of strategically defaulting, unemployment, not negative equity, is driving the current wave of foreclosures. "We estimate there is one foreclosure to every six to 10 jobs lost," Sharga said. The overall unemployment rate dropped slightly to 9.7% in May, from 9.9% in April, mainly due to the labor force shrinking by 322,000, according to the US Department of Labor Bureau of Labor Statistics. This has caused foreclosures to increase in places previously thought safe from the crisis, including Provo, Utah and Portland, Ore. There were 2.8m houses with foreclosure filings in 2009, and Sharga said that number would climb to 3.8m in 2010. The $2.5trn of option adjustable-rate mortgages (ARMs) and Alt-A loans due to reset between now and the end of 2011 will also bring increases. About one-third of these resets have already been modified, but Sharga said because the modifications are performing so badly, these loans could be worse off. "Some are staying a little more optimistic because of a lot of these loans have already defaulted," Sharga said about the $2.5trn reset total. Even if underwater borrowers are not the main force behind the foreclosure wave, they remain a concern. The number of borrowers with negative equity declined slightly in Q110, but underwater mortgages and borrowers with less than 5% home equity accounted for 28% of all residential properties, according to the latest data from CoreLogic. Bank of America is even starting to forgive principal when modifying underwater mortgages eligible for the National Homeownership Retention Program (NHRP). With so many reasons for default, Sharga said the month-to-month levels of foreclosures should not return to more normal levels until after 2012. "We are in the midst of an unprecedented cycle," Sharga said. Write to Jon Prior.