U.S. households on the trailing on their mortgage payments and on the brink of losing their homes fell in May from April. Annually, the rate was observed to have the smallest in three years. Foreclosure filings increased nearly 18 percent in May compared to same month in 2008, RealtyTrac Inc. said Thursday.

On a monthly basis, there was a 6 percent decline in May from April.

Foreclosures are likely to remain high this year till 2010 as layoffs become the main reason that borrowers are not meeting their mortgage payments causing more defaults. Filings are expected to remain high as 9.4 percent unemployment rate may still increase.

Nationwide, economists expect unemployment to rise as high as 10 percent from while some project a more negative outlook that it may exceed 10.8 percent, the post World War II record.

More than 321,000 households received at least one foreclosure-related notice in May, according to the foreclosure listing firm's report. That means one in every 398 U.S. homes received a foreclosure filing last month.

It was the third-highest monthly rate since Irvine, Calif.-based RealtyTrac began its report in January 2005, and the third straight month with more than 300,000 households receiving a foreclosure filing.

Banks repossessed about 65,000 homes in May, up from 64,000 in April, due to big increases in several states including Michigan, Arizona and Nevada.

Nevada got the highest foreclosure rate in May with one every 64 households receiving a filing. California followed with one in every 144 households. The number two slot was previously occupied by Florida.

In Florida which is now at number 3 spot had one in every 148 households receiving a foreclosure filing. Completing the top 10 were Arizona, Utah, Michigan, Georgia, Colorado, Idaho and Ohio.