Come travel through time to ARM future

Time tunnel


KAI RYSSDAL: I figure what we'll do is start in alphabetical order, just to be fair:

Beazer Homes is first -- the company announced today it's going to re-state earnings back to 1999... something about problems with its mortgage unit.

From there we go on to Centex, Lennar and Pulte -- Moody's cut its debt ratings for each of the homebuilders to junk, on the expectation the housing industry's going to be miserable until 2009.

Also this morning, we got some new foreclosure numbers... Kind of a mixed bag there: Month to month, the news is actually pretty good. September '07 foreclosures were down from August. But year on year -- that is, since September '06 -- the number of people at risk of losing their homes has doubled.

Now that you've digested all that, consider that it's entirely possible we'll look back not too long from now and see this as the easy part. Over the next year or so, millions of adjustable-rate mortgages will re-calibrate to higher interest rates.

We asked Marketplace's Steve Tripoli to climb into the Marketplace time machine, with the dials set for, say, next August, and give us tomorrow's news today.

STEVE TRIPOLI: I caught up to Wellesley College housing expert Karl Case in the time machine -- here's what he says the chatter will be next August:

KARL CASE: We were watching a train wreck slowly unfold.

Case says that even back in late '07, we knew those exploding adjustable-rate mortgages would bring more pain. Mark Zandi at was there next August, too. Here's what he says we'll have seen:

MARK ZANDI: The worst run-up in mortgage-loan defaults and foreclosures since the Great Depression.

Zandi saw it coming back in '07, too. He knew then that 1.4 million mortgage defaults were still ahead, and that the millions of households whose mortgage payments were going up would be shelling out an extra $350 per month, on average.

But then my time machine started acting up -- just when I was asking about the larger impact of this mess, Zandi saw the culprits.

ZANDI: There's a couple of wild cards here.

The wild cards gummed up the machine, and landed us back in the present... Zandi picked up one of the cards and saw this possible future:

ZANDI: We have some control through policy. If policy makers are prudent, we might be able to get through this with at least a little bit less damage.

Rick Sharga from RealtyTrac picked up the other wild card -- it also showed a way to lessen the pain:

RICK SHARGA: If the rest of the economic conditions stay in place, the market should be well-positioned to stabilize pretty rapidly. The thing we have to avoid is market panic.

But will the economy stabilize without panic? And will policy makers step up to the plate? Sorry, for those answers you'll need a better time machine than mine.

I'm Steve Tripoli for Marketplace.


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