By Tim Logan

ST. LOUIS POST-DISPATCH

10/23/2008

Foreclosures continued to climb in St. Louis in recent months. And while the growth has slowed, there's no sign the problem is going away.

One in every 188 St. Louis-area houses, more than 6,500 in all, was in some stage of the foreclosure process between July and September, according to RealtyTrac, a California firm which tracks foreclosure.

That's up 3 percent from the previous three months and 57 percent from the same period last year.

And while St. Louis, which RealtyTrac ranked 44th among U.S. cities in foreclosure activity, has not been slammed like parts of California and Florida, some sections of the region, especially in north St. Louis County and south St. Louis, have been hard hit and in recent months the problem has spread to newer suburbs in St. Charles and Jefferson counties.

Nationwide, the foreclosure rate rose 3 percent in the third quarter but fell in September, which RealtyTrac said was due in part to new laws in several states that slow down the process by which banks repossess houses.

Foreclosures are both a symptom and a cause of the tumbling real estate market, experts say, and they sit at the base of the turmoil that's wracked Wall Street in recent weeks, as banks that hold bad mortgages and troubled mortgage-backed securities write down vast sums off their books.

Until those bad mortgages work their way through the system and house prices stabilize, it'll be hard for the economy to recover, said Ed Leamer, an economics professor at the University of California Los Angeles. So far, the country has lost $2 trillion in house value, and it hasn't reached bottom yet.

"Right now we're having a mad scramble to determine how that'll be spread among homeowners and lenders and taxpayers," Leamer said in a conference call with reporters last week. "This problem is not behind us."

The risk is that a weaker economy prompts more foreclosures, driving down house prices further. Rob Boyle, chief executive of Justine Petersen Housing Corp., which offers mortgage counseling, says he's seeing more people come through the door with simply less money to pay the bills.

"It's the economy, more in my view than the subprime and predatory lending, that is what's affecting our clients' ability to stay current," he said.

The good news, Boyle and other counselors say, is that many lenders are more willing to work with troubled borrowers. Some will cut deals and slash interest payments to keep a house out of foreclosure. And that's helping people stay in their homes.

"(The banks) have so many homes in foreclosure now," said Pat Sivels, a counselor with ACORN Housing in St. Louis. "Instead of having another, they're beginning to work with people to get a new payment agreement."

Still, both Sivels and Boyle say the number of people coming to them for help is on the rise. Mortgage rates are still re-setting upward and people are losing jobs.

"It's the same people who are having trouble with their utility bills," Sivels said. "The gas is off and they don't have money for the mortgage."