A time bomb is about to explode. Hit the deck!

Fortunately we’re not talking literal explosions here. But the mortgage time bomb is a very real problem facing millions of American families whose adjustable-rate mortgages (ARMs) are about to move from relatively low rates to potentially outrageous ones.

You might feel sorry for all those folks being taken to the cleaners on their new mortgage payments. Yeah, there will be people whose housing costs balloon from $1,200 a month to $2,500 or so overnight. But maybe we’re forgetting the real victims in all of this…

Mortgage lenders.

Yes, that’s right. As more and more real estate loans go into default, rates on new loans will skyrocket, and it’ll become harder for new homebuyers to afford a loan in the first place. That means lenders will see their business slowly evaporating.

But if there’s one thing of which the banking industry still has plenty, it’s ingenuity. While the days may be numbered for your run-of-the-mill interest-only ARM, I have little doubt that new, fiendishly clever mortgage products will pop up and allow a whole new generation of people to buy over-priced houses with little more than a dollar and a dream.

Coming Soon to a Mortgage Lender Near You:

• No payments, no interest until 20XX. I’m sure anybody can afford a mortgage payment of $0 a month, right? How’d you like to pay just that much to move into a fabulous new home of your choice? Oh by the way, your payment starting with month 13 will be roughly 80% of your monthly gross income. But you don’t need to eat or pay taxes, do you?
• 130-year fixed. Hey, it’s a fixed-rate loan, so you can’t lose! And neither can your children, grandchildren, or great-grandchildren. In fact, you’ll find it very hard to lose those housing payments because you’ll only be paying about 23 cents on the principal every month.
• Lottery loans. Everyone who applies for a loan each week gets put into a drawing, and the winner gets a fantastic rate on their loan. Everyone else, they get slightly less than fantastic rates. The perfect loan for people who think the only way to become rich is to win the lottery!
• Pre-scheduled foreclosures. The bank recognizes that they’re selling you a loan you won’t be able to afford in a few years, but they work with you before closing to determine the exact date when your savings account will run dry and you’ll be forced out on the street.
• “Magical happy-change loans.” Adjustable-rate mortgage sounds so menacing, doesn’t it? Under this new title, these loans will sound much more appealing to potential borrowers. Instead of interest-only, they’ll call it a “delightful temporary discount.” And it’s not a foreclosure anymore… now it’s just “home ownership switcheroo.”
• Indentured servitude option. Can’t afford your newly-adjusted mortgage payment? That’s okay, because the bank is looking for some extra help on nights and weekends. If you can handle a mop or a broom, you can work off your payments in a few (25 or so) short (long) years (never).

But unless these new products catch on, the future for many mortgage lenders looks a bit grim. So please, take some time out to drive down to your local financial institution, have a seat with a loan officer–any loan officer–and tell them, “I’m very, very sorry.” While you’re at it, you might want to bring them some canned goods or warm blankets… or maybe an ARM to refinance.