Banks began foreclosure proceedings against 56 percent more North Carolina homeowners last month compared with a year ago, according to a new report.

Owners of one out of every 1,086 homes across the state received foreclosure notices in March as falling housing prices made it more difficult for borrowers to refinance mortgages, said RealtyTrac, a national online marketplace for foreclosure properties.

"Foreclosure activity shifted into a higher gear in the first two months of 2007, and March's numbers continued that trend," said James J. Saccacio, chief executive officer of RealtyTrac, in a statement.

Nationwide, filings were up 47 percent compared with a year ago. Banks posted more than 149,000 filings -- the highest number since RealtyTrac started compiling its report in January 2005.

The five states with the most foreclosures -- California, Florida, Texas, Michigan and Ohio -- together accounted for 50 percent of the nation's total.

North Carolina ranked 17th nationally, with 3,241 filings.

Foreclosure filings don't always result in the owners losing their homes. Lenders file the complaints in courts, usually when the borrower falls 90 days behind in payments. At that point, the lender wants the home to be sold to pay the entire debt. The borrower can often prevent that by filing bankruptcy, making back payments or refinancing.

Peter Skillern, executive director of the Community Reinvestment Association, a Durham nonprofit group that advocates fairness in lending, said he was not surprised by the big spike in North Carolina.

"I think the primary cause for the increase is the use of adjustable rate mortgages. Borrowers simply can't afford them," he said.

It's unknown whether the trend will continue the rest of the year.

Saccacio said there was a possibility the market could mimic last year's performance, when the foreclosure rate surged during the first quarter, but leveled off in the second and third quarters.

Skillern said that it's more likely to climb. Many of the so-called 2/28 loans that offer a low fixed interest rate for the first two years and then switch to a higher adjustable rate are scheduled to adjust this year.

Nationally, the number of adjustable-rate mortgages due to reset at higher monthly payments will peak in September, October and November, said Mark Zandi, chief economist for Moody's Economy.com, a research firm.

That means more people are going to have a hard time paying their mortgages, Skillern said.

With housing prices slipping, fewer banks are willing to refinance borrowers out of the expensive loans, he said.

The National Association of Realtors forecasts that the median price of a home will fall .7 percent this year to $220,300, the first decline since the group began tracking prices in 1968.

Also the number of subprime lenders, which made loans to people with weak credit, is shrinking. In the past few months, at least 50 have closed or stopped making subprime loans altogether.

But help is on the way.

New federal guidelines issued earlier this year recommend tougher rules for lenders that offer loans to risky borrowers, such as requiring them to qualify for the full loan or pay a bigger downpayment. Those rules eventually could help to curtail the foreclosure increase, Skillern said.

This week, finance giants Freddie Mac and Fannie Mae said they are developing more consumer-friendly subprime products that will provide stable financing alternatives going forward. They also said they would create new types of loans to help customers keep their homes.

Freddie Mac said the new products are expected to be available by midsummer. They will include fixed-rate mortgages as well as adjustable-rate mortgages with longer fixed-rate periods before resetting to higher rates.