All of these loans and complex financial instruments are built on the idea that foreclosure rates are more or less constant and predictable. Unfortunately, with the surge in mortgage writing, there was also a surge in strange (and downright predatory) mortgage loans made. The big culprit is the Adjustable Rate Mortgage or ARM. These are usually initiated with a teaser rate that's nothing but interest; after a given period of time, the mortgage rate goes up to something fixed on the Federal Reserve rate.

Well, most of those pigeons came home to roost in late 2006, and entire flocks of mortgages with teaser rates had their teaser rates expire in 2007. Most home owners went from 'I can make the payment if I save' to 'My home payment is twice my monthly income' as the rates jumped from 3% to 9 or 10% - which usually doubles or triples the home payment every month.

This caused a rash of foreclosures; suddenly a lot of those ABSs were worth a lot less money, and banks started writing down loans (which is financial speak for 'We aren't getting paid...')

It's a near perfect storm of opaque banking products and an interest rate yo-yo... and we're going to be dealing with the repercussions for the next two or three years.

If you are facing foreclosure, have multiple mortgages on your property, or are several payments behind on your mortgage, you need help fast. Vivid Properties is a group of real estate investors that specializes in buying houses from people like you. You'll receive a fair price for your property, and a simple, no-hassle closing with no costs to you.

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