What your banker wont tell you

This summer could be a foul season for many consumers followed by tumultuous times for the remaining years. The quadruple jinx of rising interest rates, higher credit card minimum payments, erratic fuel costs, and depressed home values could be the calamity for many families already living on the threshold of bankruptcy.

Americans who recently broke into overvalued home equity, at historically low interest rates, are now seeing a sign of things to come. In some cases, consumers may find themselves upside down, owing more than their home is worth. In other cases, low interest rate credit cards now mandate APRs at least four percentage points higher than two years ago. Plus, issuers have been forced by regulators to double minimum payments on some cardholders who are paying high interest rates. But the real blistering is fuel prices which could now soar any day to any price. Paying $4 per gallon for gas, higher utilities, a 30%+ APR for credit cards, and clinging to a 100%+ home equity line of credit may push more Americans into foreclosure and ultimately bankruptcy.

Dont kid yourself on your current home situation. If you are upside down in your home, there is a clause in your contract with the lending institution that states that they can call the loan in at anytime. That means quite simply that they can force you to pay enough to settle yourself into an equity position or foreclose on the home. Why would the banks do that?

Look at it this way. Banks are in the business to make money, its as simple as that. In addition, while you are mailing off your mortgage payment to Chase Manhattan, it may actually be forwarded to The Bank Of Beijing! Thats correct. China now holds over 40% of American home mortgages.

There is a concrete reason that credit card minimums have doubled. The credit card industry will attempt to fill your head with propaganda such as: they are attempting to help consumers get out of debt quicker. What they are really pulling off is this: when you cant make the minimum payment and contact them, they are now trained to look at your credit file and determine how much (if any) equity you might have in your home. They then offer you a consolidation loan with their bank. Should you decide to take them up on their generous offer of a consolidation loan, they then own you. Should you default on your credit card, they can take the house! Beware of wolfs in sheeps clothing.

Another clandestine offer is consumer credit counseling. Every ad and commercial you will see for this service pitches themselves as a non-profit organization that was established naturally to help you get out of debt quicker, thus avoiding bankruptcy. What you dont know is that the non-profit consumer credit counseling industry if fueled and funded by the credit card industry. They report to the credit card industry! They also will not make your monthly payments on time, thus ruining your credit history anyway. I have seen this time and time again, over and over.

This brings me to ARMs. In short, they are adjustable rate mortgages. Never in American history have we seen so many people with no credit files approved for home loans. Many of these people were innocently following the American dream and quite naturally, the American dream is to purchase as much house as you can afford for the longest amount of time. Based on this fact, many people that could not afford that dream house under conventional financing were able to afford it by incorporating an ARM loan.

In the long run, this will come back to bite them hard. When they signed an ARM, they were betting that the interest rates would not rise during the next 30 years! When the rate does rise and their mortgage rises accordingly, we will start seeing the effects of this in the way of mass foreclosures. As of this writing, we are already at an all-time high for foreclosures starting with Indianapolis in first place, Atlanta in second place and Dallas-Ft. Worth in third place. As rates continue to rise and jobs continue to be outsourced, we will see a plague of foreclosures that I predict will surpass the 1980s.