LoanCentral's Real Estate Lending Blog

Wall Street Journal (03/19/07) P. A9 ; Hagerty, James R.

Looking at 8.4 million adjustable-rate mortgages written between 2004 and 2006, First American CoreLogic expects about 13 percent of them, or 1.1 million, to enter foreclosure once their interest rates reset.

While lenders stand to lose about $113 billion, analysts do not anticipate any harm to the national economy, as it will take six years to seven years for the scenario to play out. His estimate climbs to 1.9 million foreclosures in the event that the average home price falls 10 percent from its December 2006 level and drops to 489,000 foreclosures if the average home price jumps 10 percent.

The most vulnerable loans had initial "teaser" rates of less than 4 percent, with analysts expecting a 118-percent surge in monthly payments on those loans when interest rates adjust.