NYT: The Trillion Dollar Bet

[Tandalayo_Scheisskopf]

American homeowners have made a trillion-dollar bet that mortgage rates will remain near record lows for at least a few more years. But with some interest rates already rising, economists worry that the bet could turn bad.



The problem is that new types of mortgages that hold down monthly payments for families - helping many buy homes that they would not otherwise be able to afford - also require potentially far higher payments in future years.



The bill will soon start to come due in a serious way, as the initial period of fixed payments, typically set at artificially low rates, expires for millions of homeowners with adjustable-rate mortgages.



This year, only about $80 billion, or 1 percent, of mortgage debt will switch to an adjustable rate based largely on prevailing interest rates, according to an analysis by Deutsche Bank in New York. Next year, some $300 billion of mortgage debt will be similarly adjusted.


But in 2007, the portion will soar, with $1 trillion of the nation's mortgage debt - or about 12 percent of it - switching to adjustable payments, according to the analysis.

http://tinyurl.com/ab96w

[acmejack]

1. That should be the final straw for many

We will get an unfortunate opportunity to see the new bankruptcy law in action.

[Tandalayo_Scheisskopf]

2. Much more than that, my friend.

The effects of this are going to be much more devastating. 2007-2010 are gonna be very interesting indeed, if this prediction holds.