American mortgage crisis will even get worse.

Next year many people who have a mortgage will have to deal with an interest adjustment adjustment. Many of those borrowers won't be able to deal with this, so there will be even more house who get sold. The interest adjustment will eventually result in a surplus of 362 billion dollar interest. The main part of the subprime adjustable-rate mortgages are the
2-28-loans. Here the interest rate is fixed the first two years but is adjustable every year in the following years. If a mortgage with a fixed rate of 7% gets adjusted to 9.5% in the third year, it means an extra $350 interest for the average borrower.
An other point wich indicates that the crisis will even get worse is that if houses eventually have to be sold, it will be hard to sell them and they will be worth less. The value of houses already decreased by 25%...
Meanwhile the American government is trying to do something about the crisis. Arnold Schwarzenegger made an agreement with four main bank to freeze the adjustable rates of some adjustable mortgages. This could mean a lot for people who still can pay their interests but wouldn't still be able if the rates got adjusted.

The crisis will get worse for sure. A $350 dollar extra interest is a disaster for someone who already struggles with the current rate. Those people will be forsed to sell their homes. But the gains from this sale won't be enough to pay their loans back. The value of houses already dropped by 25%. There will be social dramas, poverty will increase, employment will drop, it will be harder to maintain social wellfare,... .
The reaction of Arnold Schwarzenegger is a beginning but he won't be able to freeze the rates forever. The main problems like the prices of the houses have to be solved. They will have to do something rapidly about this or social disasters will happen!

Thomas

source: http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3405177