However, manager Glenn Roeder has protected the club's interests by ensuring there is a fee due to the Hammers if he moves on.
The deal will go through - subject to a medical - on Friday, and Glenn says: "We think we have got a deal with Southend. They have been delighted with him since he has been there because he has made a real impression on the supporters and the management alike, evidently.
"You only have to look at a couple of Southend players in recent times, Dean Austin and Justin Edinburgh, that left bigger clubs to go to Southend and ended up playing for Tottenham.
"It can happen, but we have taken out an insurance policy if it does because we have a sell-on clause if Southend were to make significant money on Steven.
"But the important thing is for him to get his senior career up and running at Southend, which is an excellent club. We wish him all the best.
"Although it is a sad day for him leaving the West Ham - and having spoken to him today he was quite emotional at the thought of leaving us - I said we would be happy to see him back down at Chadwell Heath on his day off to see the lads train.
"He is a player that I have worked with, and I've got to say I have enjoyed working with him as much as any young player here.
"He is a likeable young man who is a credit to his family and West Ham, and I'll be quite sad to see him go, but he needs to go to get his professional career up and running.
"I know that if he does there will be a few young lads there that play for our reserves on a regular basis that are quite envious of him being given this opportunity to play with the men.
"He has gone across there to play senior football and I've always been a great believer that for boys to become men they have to play with the men.
"That's what Steve is going to do, and I'm sure that he will have every chance to do that with Southend."
The sale of Steve illustrates the difficulty of making the step up from junior football to the first team at Premiership level, and Glenn says: "It's absolutely huge. Such a high level is expected and there are very few Michael Carricks, Jermain Defoes, Joe Coles, Rio Ferdinands, and Frank Lampards that have been able to make the jump in their teenage years.
"Sometimes it takes boys that much longer - even to 21, 22, or even 23 - before they reach the required standard.
"But we have one or two that might just do that if we are patient next year."
Southend boss Rob Newman says: "We were impressed with him in the five games he played for us on loan, and he could be a real asset for us at the back."
Meanwhile, Steven's representative, Saif Rubie of EPR
Sports, said: "Steven is very sad to leave West Ham and would
to thank all the coaching staff at the club for everything they have taught him.
"He believes his move to Southend will be a launching pad for his career and will be trying his upmost to help the club gain promotion this season."