"Foreclosure" is hung on a For Sale sign in front of a townhouse in Herndon, Va.
"Foreclosure" is hung on a For Sale sign in front of a townhouse in Herndon, Va. - 
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JEREMY HOBSON: The nation's foreclosure epidemic is getting worse far from where it started. A report out today from the foreclosure listing firm RealtyTrac says foreclosure activity is up sharply in places like Chicago and Seattle.

Marketplace's Nancy Marshall Genzer joins us now, live from Washington with more on this. Good morning, Nancy.

NANCY MARSHALL GENZER: Good morning Jeremy.

HOBSON: Nancy, many of the early foreclosures in this crisis had to do with the bursting of the housing bubble. What are the reasons for this new wave?

GENZER: Well, Jeremy remember homeowners are losing their job, or maybe seeing their hours cut. So they're falling behind on their mortgage payments. Now, the cities with high foreclosure rates are still in the states at the epicenter of the crisis. But foreclosures in the Seattle area have increased 71 percent from last year. Chicago is up 35 percent. And things are just going to get worse. Foreclosures are expected to peak next year.

HOBSON: And is this at all related to "foreclosure gate" -- the story we've been talking about with all these problems with paperwork?

GENZER: No. Actually, the foreclosuregate will actually cause foreclosures to actually dip slightly at the end of this year. Because some banks have frozen foreclosures so they can fix their problems with paperwork. Things like someone "robo-signing" stacks of documents without reading them. But Rick Sharga of RealtyTrac told me those problems will be resolved soon.

RICK SHARGA: Probably by the second quarter of next year the robo-signing issue at least in terms of foreclosure activity, will be sort of a blip in the rear view mirror.

Sharga says the state attorneys general who are investigating the foreclosure paperwork mess could levy fines, and even file criminal charges. Bloomberg is reporting a task force of attorneys general could meet with lenders as early as this week.

HOBSON: Alright, we'll be following it. Marketplace's Nancy Marshall Genzer, reporting from Washington, thanks.

GENZER: You're welcome.