The Wall Street Journal reports on adjustable rate mortgages. "The downside of the lending boom is starting to show. Rising interest rates are taking a toll on family budgets as growth in home prices flattens, and, in some areas, prices fall. The portion of adjustable-rate mortgages that were at least 90 days past due has climbed 141 percent in the past year, according to a recent study."

"Housing counselors say they are hearing from a growing number of middle- and upper-middle-income borrowers who borrowed heavily to finance spending or buy a house they could barely afford."

"Luisa Cordova-Holmes was looking to lower her monthly payments when she refinanced her $312,000 mortgage in 2004. Instead, she wound up digging herself into a ditch. Ms. Cordova-Holmes and her husband chose a so-called option adjustable-rate mortgage, which gave her multiple payment choices each month. 'I had a lot of financial obligations,' says Ms. Cordova-Holmes."

"Two years later, however, the interest rate on her loan has jumped to 8.75 percent, her loan balance has climbed to $324,000 and her minimum monthly payment has risen to $2,257. She says the terms of the loan weren't clearly spelled out."

"Ms. Cordova-Holmes says she would like to refinance, but can't, in part because her loan carries a prepayment penalty. Instead, she's trying to sell her home. But with Detroit's economy slumping, she hasn't been able to find a buyer. When she and her husband first put the house on the market last summer, they were asking nearly $400,000. Now they're willing to accept as little as $270,000."

"'We're in a very bad situation,' she says. 'The payments are just killing us.'"

"Until recently, most mortgage-payment problems were an unfortunate byproduct of major life changes, such as job loss. But for the new wave of troubled borrowers, the problems stem largely, or in part, from the structure of their mortgage, housing counselors say."

"In the past, the home mortgage 'was a steadying influence; it neither rose nor fell over time,' says Elizabeth Warren, a Harvard Law School professor. 'All that has changed in the last half-dozen years,' she adds. 'The mortgage payment is now more variable than any other expense for millions of people. We're working in completely uncharted territory.'"

"'Often the reason somebody is put into an ARM or an interest-only loan..is because that's the only way the broker or loan officer could get them qualified,' says Jordan Ash, director of an advocacy group that focuses on predatory lending issues."

"Edward Snyder, who bought his house in St. Paul, Minn., two and a half years ago. Mr. Snyder financed the $210,000 purchase with a $168,000 interest-only ARM and a $42,000 second mortgage. Mr. Snyder says he was stretched even before a rate adjustment on his ARM boosted his monthly payments by $200 in May. Since then, he has fallen behind on his water bills, car payments and student loan."

"'Now, it's a choice of what gets paid late,' Mr. Snyder explains. Last month, he received a letter from his lender with the words 'rate increase' on the envelope. Mr. Snyder says he hasn't opened it 'because it gets too discouraging.' This week, he's meeting with a mortgage broker to discuss his options."

"'If I had been aware both loans were interest-only, I would have probably turned the loan down,' says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him. 'I believe this loan is built for failure. There's no means to build up equity.'"

"Some California brokers say they are beginning to see a return of 'short sales,' transactions in which the sales price isn't large enough to cover outstanding loans. Patti Vaughan, an agent with in Temecula, Calif., says in recent months she has begun to get calls from borrowers looking to unload houses they can no longer afford. 'They've upgraded their houses, put in a pool and bought themselves Hummers and BMWs,' she says. 'Now they can't get it refinanced and they can't sell.'"