With housing prices going through the roof in the last few years, many people began considering riskier loans. At the time, nobody thought these were riskier because home values were going up faster than a hot air balloon.

But those days are gone for now. Home values in many areas of the country are dropping…not rising. And more than a million families have lost their homes this year due to foreclosure.

The two groups hardest hit are at different ends of the spectrum. The largest category is who took out subprime loans. Subprime loans are made available for those whose credit history is below average or for those who are outside the normal income/expense ratios.

Secondarily are those that just aren't satisfied. (A cousin of mine is a textbook example!) You know those people.  They gobbled up those Interest Only Mortgages so they could buy a McMansion that was way too big….but would impress the heck out of their family and friends. The thing many people who bought McMansions didn't realize is that large utility bills, property taxes and insurance bills go hand-in-hand with those humongous houses.

Now the rates are skyrocketing. These homes can't be sold because you owe more than you paid (and if your mortgage includes negative amortization, you owe WAY more than you paid!). So people are walking away in droves.

The three biggest states for foreclosures right now are Colorado, Nevado and Georgia, followed by my state, Florida. In fact, in Georgia, foreclosures are up by 100% over last year.  And those figures are likely to grow in 2007 because $1.2 trillion dollars in mortgages are up for adjustment next year. 

Years ago, people started small and traded up until they could afford their dream home. If you can't afford convention loan payments, how do you think you'll be able to pay ever-growing payments with an adjustable mortgage?