Rose Oswald Poels, of the Wisconsin Bankers Association blames the growth of sales for adjustable rate mortgages, which were popular in a red-hot housing market a few years ago.?Adjustable rate mortgages purchased with a monthly rate at the far limit of the customer's purchasing power are like ?loss leaders? in the retail world.?The merchant offers something at a price level, which will lose money, with the expectation that the loss will be made up by other purchases.?

In the case of the adjustable rate mortgages, the initial interest rates were extremely low, but once the locked rate grace period was completed, the rate, tied to a fluctuating index, has climbed dramatically.?An adjustable rate mortgage interest rate can increase by several interest points in a matter of months, which can add hundreds of dollars to the borrower's monthly payment.

Because fixed rates were so low, it is surprising that ARM's were as popular as they were, but homeowners looked only at the initial monthly payment and not at the larger picture.?They did not take into account the disaster that could occur if and when the adjustable rates when up as they almost invariably do.

Another factor was the fact that banks were somewhat easier with loan qualifying requirements because money was available and interest rates were low. This allowed for more ?creative? financing options than would normally be available.

Other factors which enter into the picture of foreclosure loss include high credit card debt with higher interest rates and minimum payments, higher bills for energy and for deductibles on health insurance premiums. For those depending on two full-time incomes, the loss of one job or reduction of hours can be a disaster.

The easy availability of nationwide lenders entering into a local market can create problems as well.?First and second mortgages higher than the house value, which may not include insurance and taxes is a recipe for disaster.?Some of the lenders can only be considered predatory.

The other factor which cannot be discounted is the emotional attachment of the homeowner to the property.?People try to hang on long past when they should have moved on to something more in line with their income and expenditures.