CNN.com reported (Reuters) this morning that the coming changes to adjustable rate mortgages will result in increased foreclosures.
About 1.1 million additional home foreclosures are expected over the next six years as adjustable-rate mortgages - which made home buying more affordable to U.S. buyers in recent years - reset to higher payments, according to a study by research firm First American CoreLogic.
...
Some loans made over the past few years were designed to allow initial periods of low payments. Many of those were "teaser" loans, which called for very low initial interest rates. A large chunk of the initial low-interest and teaser-rate loans are scheduled to reset to higher and longer term rates. Some "negative amortization" loans will call for larger principal payments than the initial loan.
Many borrowers are likely to face the double-pressure of a large reset while at the same time, stagnant or fallen property values and little money down will leave many borrowers with no equity, or ownership in the home above the mortgage. That may hasten defaults and foreclosures.
Another interesting aspect to the article is the point made about how foreclosures will affect the economy in general and retailers in particular.
http://money.cnn.com/2007/03/15/news/companies/subprime_retail/index.htm
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