Swept away

There's an interesting article on MSN that talks about the impending wave of foreclosures. The article wastes no time and, like any good piece of journalism, hits you with the most important piece of information first:

You have a 1-in-3 chance of losing your house to foreclosure if you got an adjustable-rate mortgage, or ARM, in 2004 through 2006 that had an initial teaser rate of less than 4%.

If you got a subprime ARM in that period, you started out with a higher rate, and that puts you at less risk. You have a 1-in-8 chance of losing your home.

The story sites a study by First American CoreLogic that examined 8.4 million ARMs originated in 2004-2006 (pretty much the peak of the bubble). The prediction is that 1.1 million of those borrowers will lose their homes in the next six to seven years "because of payment shock brought on by rate resets or loan recasting..."

Check out the full story for more details, including a good explanation of why some of those ARMs are so toxic.