More borrowers are falling behind on their payments, as an increasing number of mortgages adjust.

At the same time, lenders are clamping down on borrowers with poor credit and low or unpredictable income. Sub-prime lending could decline as much as 50 percent this year from last year’s total of $600 billion, says David Liu, a mortgage analyst at UBS AG.

The net result will be a rising number of foreclosures, warns Mark Zandi, chief economist at Economy.com. Zandi notes that borrowers will face higher monthly payments as rates adjust and because of tighter lending standards, many won’t be able to refinance into loans with easier terms.

Zandi estimates that the number of foreclosures in the U.S. is likely to reach a record 1.3 million this year, compared with an estimated 900,000 in 2006.


Source: The Wall Street Journal, James R. Hagerty (04/04/2007)