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
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...   (Associated Press)
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(Newser) – 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.