Heavy debt loads, rising interest rates, high fuel and energy costs, softening values in the housing market and stagnant wages are just a few of the difficulties faced by consumers and are culminating to create concerns for increased risk not only for borrowers but also for lenders, particularly in relation to certain types of mortgages.

Concerns are two-fold.

First, according to analysts, mortgage delinquencies will rise between 10 to 15 percent next year, with as many as a third of these reaching foreclosure status. The majority of these delinquencies will be on negative amortization mortgages and payment option adjustable rate mortgages, especially those within the subprime lending market.

For just these reasons (and more) the Office of the Comptroller of the Currency, (the same group that brought you higher minimum credit card payments) has turned its attention to creating regulatory guidance on mortgage lending. Of course, the Office makes note of the concerns for those consumers currently faced with these mortgages, which may have been sold to them under the premise that it would enable borrowers to afford homes in high value markets. They are also aware of how these loans, originally designed for well off borrowers, have begun to dip into the subprime mortgage lending market creating a high-rate, high-cost mutation of the original mortgage category.

Many borrowers initially intended to refinance or sell the houses prior to the initiation of rate increases, yet a softening housing market and the prepayment penalties that are a feature of many subprime loans have created greater financial pressures for borrowers. As a result of the greater risk in the subprime market there is potential for lenders to stumble into insolvency if delinquencies and foreclosures rise as predicted. The apparent objective of the Office of the Comptroller will be to delineate clear standards for borrowers qualifying for the ARM and negative amortization loans.

What to do if you find you are one of these borrowers? Investigate refinancing options to a fixed rate mortgage. Review your other credit obligations to see what adjustments can be made. If you are unsure about what options you have, get help. Contact a certified credit counselor and/or a HUD approved housing counselor, like the credit and housing counselors at CAF to assist you in reviewing your situation, reviewing your options and creating an action plan for moving forward.