USA Today has this report on adjustable rate home loans. "The real estate market is cooling, interest rates are rising and tens of thousands more Americans are starting to have trouble paying their mortgages. Nearly 25% of mortgages, 10 million, carry adjustable interest rates. And most of them went to people with subpar credit ratings who accepted higher interest rates."

"'Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans,' says Chris Krehmeyer, executive director of a non-profit group that offers homeownership support services in St. Louis. 'That's significantly higher than in years past, because the ARMs are coming home to roost.'"

"The number of borrowers in trouble will rise this year and peak in 2007 and 2008 as the largest number of mortgages reset to higher rates. Already, in West Virginia, Alabama, Michigan, Missouri and Tennessee, about one in five homeowners with a high-interest (subprime) ARM was at least 30 days late at the end of last year. After 90 days, the foreclosure clock starts ticking."

"What worries experts such as Christopher Cagan are the adjustable-rate loans made in 2004 and 2005, at the end of the housing boom. These loans were concentrated in the hottest markets, such as California, where about 60% of all loans last year were interest-only or payment-option ARMs. That's the highest such rate in the country."

"Of the 7.7 million households who took out ARMs over the past two years to buy or refinance, up to 1 million could lose their homes through foreclosure over the next five years because they won't be able to afford their mortgage payments, and their homes will be worth less than they owe, according to Cagan's research."

"The losses to the banking industry, he estimates, will exceed $100 billion. That's less than the damage from the savings-and-loan crisis in the 1990s, which cost the country $150 billion. 'It will sting the economy, but it won't break it,' he says."

"When Paul and Sandra Wilson moved from California, where they couldn't afford to buy a home, to Georgia in May 2004, they bought a house with an interest-only loan. But Paul has had a tough time finding work. They refinanced to an ARM with a lower rate but one that reset every six months and that charges a $20,000 penalty if they refinance within three years."

"'The loan broker 'convinced us that it was in our best interest, and in most likelihood within six months our financial situation would turn around and we were going to look at selling,' says Sandra."

"In less than a year, their loan payment jumped from $2,275 to more than $2,800. The couple filed for bankruptcy and will lose their home next month. 'This was our fourth home,' Sandra says. 'It's not as if we weren't aware, but we'd never had an adjustable-rate mortgage before.'"