Newsweek: Another sobering article on the human side of the housing implosion and HELOC / ARM tsunami

I read stuff like this and I'm 1) not surprised 2) upset 3) worried and 4) pissed

I keep recalling two recommendations from the brilliant scholars who helped run us into the ground - Alan Greenspan and George Bush.

First you had Greenspan recommending people get into ARMs - right before he launched the most aggressive interest rate increase cycle in decades.

Then you had the wise George Bush tell everyone about his "ownership society" dream, encouraging the last folks in the world who should've been buying homes (at the top) to buy (no matter the price) - the people with no money, no downpayment, no savings and no chance of making the ongoing (and rising) monthly payments.

Yes, people make their own decisions in life. But when rich people encourage poor people to make awful decisions, I've got a problem with that, a big one as a matter of fact.

And so you get this... people losing everything, worse off than ever, while Rich Whitey and his friends will be doin' just fine.

House Broke

Millions of Americans bought into the real estate boom with adjustable mortgages and home equity loans. Now rising interest rates are forcing them into agonizing financial choices.

Across the country, millions of homeowners are finding themselves in a similar situation. Real estate purchases that once seemed like such moneymakers have become financial burdens instead.

U.S. homeowners now owe about $9 trillion in mortgage debt. Of that, about $425 billion in adjustable-rate mortgages-initially pegged at historically low rates, but designed to shift with market trends after periods ranging from one to 10 years—will reset sometime this year, according to Freddie Mac, a government-sponsored housing financing company.

Another $600 billion in home equity lines of credit (or HELOCs) and second-lien mortgage loans, which became popular when rates were low as a means of paying off credit card debt or financing home improvements, are also being readjusted.

Those with fixed-rate mortgages payable over 15 or 30-year periods may be seeing little change, but those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regions—existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as well—there are growing fears of a looming crisis.

Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, a nonprofit debt management organization, says up to 10 percent of those now seeking counseling are being squeezed by adjustable-rate mortgages or home equity loans. "And this is just the tip of the iceberg."