Financial Pain Ahead: why housing problem is still ahead

The following chart is from OC Register blog entry and it shows how the "exotic" loans will reset their interest rates over the next many months:



(You can click above for the larger image.)

It seems that March 2008 is when people will see the most amount of change in their mortgage payments. And almost everyone will not be able to pay the new higher interest rate (since people got low "teaser" rates and usually bought the most they can buy/borrow at that time). Which means people will default and get foreclosed 3-9 months later. Expect to see record high foreclosures by the end of 2008 -- if the economy hums along as it is doing now. If the economy tanks and unemployment rises, then who knows when the foreclosures will peak since those who have fixed interest rate mortgages will default as well (not just those with "toxic" mortgages) and add to foreclosures.

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