New Flood of Foreclosures Looms

Adjustable borrowers face up to 35% spikes in mortgage payments
By Colleen Barry,  Newser Staff
Posted Jul 10, 2007 5:24 AM CDT
New Flood of Foreclosures Looms
A sign stands outside an existing home for sale that is lingering on the market in an east Denver neighborhood on Tuesday, May 22, 2007. Sales of existing homes fell by a larger-than-expected amount in April while the median price of a home sold during the month fell for a ninth straight month as the...   (Associated Press)

When adjustable-rate mortgages are increased this year, hundreds of thousands of subprime borrowers  could lose their homes, triggering a precipitous drop in the housing market, CNNMoney reports. The threat is the latest in the emerging subprime loan crisis. Heartland industrial areas, as well as once-hot markets in California, Nevada and Florida, are expected to be hit hard.

In 2004 and 2005 lenders approved  inexpensive "teaser" loans to people with spotty credit histories. Now, wide-scale delinquencies are expected as those borrowers face up to 35% more each month in housing payments. In the past, rising home prices meant borrowers in trouble could refinance to pay their debt. But housing values have already begun to slip. (More housing market stories.)

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