He predicted that this year's wave of home foreclosures would continue into 2008 as borrowers' costs continue to rise on many subprime adjustable-rate mortgages. Some 450,000 such mortgages are expected to reset to higher monthly payments each quarter until the end of 2008, he said.In my opinion, the rise of monthly payments on 1,800,000 mortgages, many issued based on poor underwriting, will occur just as the economy will be turning down. That will make it even more difficult for the troubled homeowners to make the payments.
The "bind" the fed is in means that they probably cannot lower interest rates to improve the economy because it will also cause the already downward spiral of the dollar to go even further down. If the fed continues to lower interest rates, that will cause inflation, the solution for which the fed would like to raise interest rates.
The upshot of it is that the economy is in for a rough patch, probably lasting all of 2008 at least.
For more, see Dollar value uncertain - inflation and recession or healthy economy coming? posted Monday, November 05, 2007.
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