Move over Las Vegas and Phoenix. The foreclosure crisis is entering a second phase, moving into smaller metropolitan areas.

During the first half of this year, 74% of metropolitan areas posted year-over-year increases in foreclosure activity, according to RealtyTrac. In total, more than 1.6 million properties have foreclosure filings, up 8.3% from the first half of 2009.

Although Sun Belt cities like Las Vegas, San Bernardino, Calif., and Phoenix each recorded foreclosure filings upwards of 50,000, filings have eased in those areas since the first half of 2009.

Instead, areas like McAllen, Tx. and Spokane, Wash. have experienced spikes in foreclosures because of extended high unemployment and pay cuts, says Rick Sharga, senior vice president at RealtyTrac. (He projects that foreclosures will peak next year before they decline.)

In general, these five metropolitan areas experienced a relatively small number of foreclosures compared to the rest of the country, but they have registered the biggest increases so far this year.

McAllen-Edinburg-Mission, Texas

• Number of foreclosure filings from January to June: 1,551

• Percentage increase over the first half of 2009: 230%

Rising unemployment and widespread subprime lending during the housing bubble are the primary factors contributing to foreclosures in this area. Unemployment is above the national average, at 12.2% as of June, up from 11.2% in June 2009, according to the Bureau of Labor Statistics.

Few industries exist in this area. A big problem is that they haven t had a lot of big employers and the manufacturing and construction industries there have been hit, says Don Baylor, senior policy analyst at the Center for Public Policy Priorities, a nonpartisan, nonprofit think tank in Austin, Texas. Construction jobs have plummeted as permits for new housing units fell to 1,769 year to date, down from 3,397 during the same period in 2007, according to the Census Bureau.

Residents are still grappling with the fallout from widespread subprime lending. In 2006, subprime loans accounted for 26.8% of mortgages in McAllen-Edinburg-Mission, the most popular area for subprime mortgages in the country, according to First American LoanPerformance.

Kennewick-Richland-Pasco, Wash.

• Number of filings: 206

• Percentage increase: 217%

Kennewick s unemployment rate stands at 6.2%, down from 6.7% at this time last year and significantly lower than the national rate. Existing single-family home values fell only slightly from a median sale price of $169,200 in 2007 to $167,100 in 2009, according to the National Association of Realtors (NAR).

So, what s contributing to the rise in foreclosures? The problem for people who are losing their houses is that their mortgages are haunting them, either because their income has dropped and they can t handle the mortgage or much more likely the mortgage rate adjusted upward and they can t afford the mortgage any longer, says Warren Bland, professor emeritus of economic geography at California State University, Northridge. Builders are reacting to the spike in foreclosures; permits for new housing fell to 508 during the first half of this year compared to 706 from January through June 2006.

Another city in Washington Spokane has seen a big increase in foreclosure filings, up 103%, in part because borrowers have been intentionally defaulting on their mortgages once their homes fell underwater, says Bland. Median sales prices for existing homes dropped from $193,800 in 2007 to $170,100, according to preliminary NAR data for the first quarter.

• Number of filings: 528

• Percentage increase: 153%

Rising foreclosures are another aftershock from Hurricane Katrina. The federal aid that was distributed in this region fueled construction of new homes and rebuilding of old ones that coincided with the 2006-07 housing bubble, says Ross DeVol, executive director of economic research at the Milken Institute, an independent think tank. Increased construction led to a speculative fervor that prices would continue to rise, leading consumers to buy properties at unreasonably high levels.

The median sales price of existing homes dropped from $154,400 in 2007 to $128,800, as of the first quarter of 2010, according to the NAR. With values plummeting, many homeowners were underwater and ended up doing a short sale or walking away from the property, Bland says.

The unemployment rate is 9.2%, up from 8% in June 2009, in part because of the downturn in the tourism industry, including casinos, which is a large employer in Gulfport-Biloxi, says DeVol. This area s woes may not be over and could actually worsen in the near term following the BP (BP) oil spill in the Gulf of Mexico; in addition to keeping tourists away from the region, it could also impact residents employed by the oil industry if they find themselves out of work should the ban on BP drilling continue, Bland says.

Baltimore-Towson, Md.

• Number of filings: 12,027

• Percentage increase: 130%

In 2008, Maryland s governor signed into law changes that halted the state s foreclosures. Since that moratorium expired, the number of foreclosures has been rising because of the growing backlog of homes with unpaid mortgages, says Margaret McFarland, director of the Colvin Institute of Real Estate Development at the University of Maryland. Median sales prices for existing homes dropped to $234,900 during the first quarter, down from $286,100 in 2007.

Compounding declining home values is the unemployment rate, which stands at 7.9%, up slightly from 7.8% in June 2009. Baltimore doesn t have an economy that s turning around yet, she says, adding that the city s larger underlying problem is structural unemployment jobs that aren t coming back. This issue predates this last recession, starting two decades ago when the manufacturing and port-related industries started leaving. The major industries now are academic and medical, like Johns Hopkins University and the University of Maryland. Employees at the latter have incurred pay cuts, which McFarland says could impact mortgage payments, as well.

Barnstable Town, Mass.

• Number of filings: 1,403

• Percentage increase: 93%

Rising foreclosures in Barnstable, the largest community on Cape Cod, are occurring because many homeowners are underwater and can no longer afford to make payments, says Ross Joly, president and CEO Coldwell Banker Joly, McAbee & Weinert Realty in Cape Cod. The median sales price of existing homes dropped to $325,600 from $384,700 in 2007.

Subprime mortgages were widespread during the boom here, accounting for about 30% of mortgages in the area, he says. One of the reasons Barnstable county is up [in foreclosures] is because of financing that took place from mortgage companies on the Cape, he says, adding that lenders were over-financing, giving borrowers up to more than $100,000 than they needed to buy the home.

Unemployment is up at 8.1% compared to 7.4% last June, in part because of a decline in construction activity. Tourism-related jobs also have been impacted because of fewer vacationers a trend that s just starting to turn around this summer.