Oct. 11 (Bloomberg) -- U.S. home foreclosures doubled in September from a year earlier as subprime borrowers struggled to make payments on adjustable-rate mortgages, RealtyTrac Inc. said.

There were 223,538 foreclosure filings last month, including default and auction notices and bank repossessions, an 8 percent decline from August. California had the most with 51,259 filings and Florida was second with 33,354. The national foreclosure rate was one for every 557 households.

Foreclosures are deepening the U.S. housing recession by pushing more homes onto a market where sales and prices are dropping. There's a 10-month supply of unsold homes, the highest in at least eight years. As many as half of the 450,000 subprime borrowers whose mortgages will re-set through December may lose their homes because they can't afford the higher payments, according to data complied by UBS AG and Credit Suisse Group.

``The truth of the matter is that borrowers are going into default as soon as they hit their adjustments,'' said Rick Sharga, executive vice president of marketing at Irvine, California-based RealtyTrac. The company sells foreclosure information and has a database of more than 1 million properties from 2,500 U.S. counties.

Countrywide Data

The August foreclosure rate recorded by RealtyTrac was the highest in 32 months. Countrywide Financial Corp., the largest U.S. mortgage company, said today foreclosures in September doubled and late payments at its servicing units rose. The company's delinquency and foreclosure rates are likely to double over the next two years, said a report by Moshe Orenbuch at Credit Suisse.

Prices in 20 U.S. metropolitan areas fell 3.9 percent in the 12 months through July, the most on record, according to the S&P/Case-Shiller home-price index. New-home sales may decline 24 percent to a 10-year low of 804,000 and existing homes sales will fall 11 percent to a five-year low, the National Association of Realtors said yesterday.

The swelling inventory and discounts on unsold homes offered by builders will hurt people facing foreclosure, Sharga said. ``The discounts put pricing pressures on resale properties, and the people who can't afford that pressure are the ones who are in economic distress and really need to sell their homes,'' he said.

Subprime Borrowers

Adjustable-rate mortgages to subprime borrowers, people with limited or weak credit histories, accounted for 7.3 percent of all home loans and 44 percent of all new foreclosures, according to the Mortgage Bankers Association in Washington.

The adjustable loans have lower introductory, or ``teaser,'' rates that can re-set by 50 percent to 100 percent after two or three years, meaning that a $1,500 mortgage payment can increase to as much as $3,000 after the adjustment, Sharga said.

Foreclosures on loans made in 2005 may ``start to wind down'' at the end of the year, while loans made in the first half of 2006 will probably lead to additional foreclosures in the middle of 2008, Sharga said. ``This wave ends in December, and another wave starts in May,'' he said.

Nevada had the highest foreclosure rate in September among U.S. states, one for every 185 households, and 5,504 filings, an increase of 187 percent from a year ago, RealtyTrac said. Florida's rate was the second highest at one for every 248 households, and California's was third at one for every 253 households.

The foreclosure process typically begins when a borrower is more than 90 days late on mortgage payments and the lender files a notice of default. If the borrower doesn't pay what's owed, the property goes to auction. If bids don't reach that amount, the lender takes ownership of the house.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net.

Last Updated: October 11, 2007 16:25 EDT