Shocking Surprises Still in Store in the U.S. Mortgage Meltdown
December 30, 2008
When it comes to the U.S. economy, people are already beginning to wonder if the problems have no end. But it turns out the crisis may be even deeper than most people think.
There is a second mortgage shock heading for the economy. Sub-prime mortgages were bad enough, but there were two other kinds of exotic mortgages that became popular before the housing bubble collapsed, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates, but after two, three or five years those rates "reset" and went up. A mortgage of $800 dollars a month could easily jump to $1,500.
Now the bulk of Alt-A and option ARM loans are starting to reset, causing the mortgage payments to go up and homeowners to default. The mortgage bankers association says one out of 10 Americans is now behind on their mortgage -- the most since they started keeping records in 1979. In the next four years, eight million American families are expected to lose their homes.