Mass Home Foreclosures Coming--Don't get Caught up in this Tide

--Is there a way to Sidestep this Threat, Protect Yourself? Yes, but Fast Action is Required

It is predicted by the so-called "experts" that 1,500,000 sub-prime adjustable rate mortgages will default by the end of 2008. That is more than $2.25 trillion--yes, trillion--in monthly payment resets from 2007 to 2009.

The Mortgage Bankers Association finds that well over 15% of sub-prime ARMs--an all-time high--are now running behind in payments. And, the rate of defaults is speeding up, alarmingly.

The marketing fix usually suggested is to quickly rush to the fore with something new. But, when dog food is "new and improved," who tastes it? In this case fallback positions are sought.

As in all perilous times, fingers of accusation are pointing in all directions. Sub-prime home buyers cry out loudly that they were taken advantage of. Victimhood on parade. Lenders complain bitterly about Congress forcing upon them ridiculously loose anti-red-lining laws, which gave them no choice but to lend to countless unqualified borrowers. While whining, kicking, and screaming is not the socially acceptable way, many lenders pursue this childlike remedy nonetheless. Politicians point fingers at each other. (and form the circular firing squads for orderly executions!) House flippers decry bankruptcy laws ("The Devil made me do it.") Mortgage brokers, who have ignited 70% of these suspect loans, say the fault lies with house flippers and real estate speculators, and paint these as the ones who have laid these land mines for them to negotiate. Notorious for their after-business-hours, cocktail-time ways, many of these brokers are now concluding that sometimes too much to drink is not enough.

If you are obligated to an adjustable rate mortgage, and deeply worry about the sudden jolt of a $500-$1,000 (or more) increase in your house payments, how do you protect yourself? if you are limping along with this ARM, there is only one way: refinance to a fixed rate mortgage. With the fast-shrinking U.S. dollar (in terms of world-wide worth), and with exploding energy and precious metals prices, inflation can only be a dire threat to you. This means your adjustable rate mortgage could "reset" you to an untenable position--maybe, even, right into the Poor House.

No need to stick your head in an Easy Bake oven. But, it is time to stop, reappraise.

Sure, most ARMs carry stiff pre-payment penalties. But, remember, these mortgage carriers have no desire to end up getting stuck with worthless paper. Hence, most will be willing to negotiate a lower figure--if they conclude that there is no other way of preventing default. (Sure, strip mining prevents forest fires, but this is over the top.) Real estate brokers renegotiate these pre-payment penalties all the time, so your chances are good.

In the mining business there is an old truism observed closely by all miners working underground: When the support beam begins to crack move swiftly to the mine entrance.

Would this truism apply to looming home foreclosures, too, do you suppose? Common sense?

The support beam is cracking. Now is the time.