Experts Predict Big Foreclosure Fallout
As home prices fall and lenders tighten credit terms, some observers close to the subprime market predict that things are going to get worse before they get better.

The delinquency rate for all types of mortgages rose to 4.67 percent in the third quarter of 2006 from 4.39 percent in the prior three months, a gain of 6 percent, according to the Mortgage Bankers Association.

Foreclosures last year were up 42 percent from 2005 levels, and will likely rise another 20 percent to 25 percent this year, predicts RealtyTrac Inc., a real estate information service.

"It's going to be a bloodbath this year," says Renae Gorney, director of loss mitigation at Freedom Foreclosure Prevention Services in Mesa, Ariz.

Christopher Cagan, director of research and analytics at First American CoreLogic, estimates that adjustable-rate mortgage resets will trigger some 1.1 million foreclosures over the next 5 or 6 years, wiping out $110 billion in equity.

While that may sound like a lot, Cagan doesn’t believe the fallout will significantly slow the U.S. economy or even severely damage the mortgage industry because it’s actually a pretty small percentage.