Foreclosures in the United States in August rose 36 percent from July, according to RealtyTrac. Lenders sent notices of default to 108,716 homeowners in August, up from 42,144 in the same month last year.

RealtyTrac’s monthly report revealed that there is one foreclosure filing for every 510 U.S. households.

“The jump in foreclosure filings might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable-rate loans are beginning to reset now,” RealtyTrac Chief Executive James Saccacio said.

About 2.9 million subprime borrowers have adjustable-rate mortgages, making up $84.4 billion worth of loans, according to Bloomberg.com. These subprime loans are set at a low introductory interest rate for a few years before adjusting to a much higher rate. Almost 90 percent of subprime mortgages will reset at higher rates by the end of 2008.

This will only lead to more foreclosures as subprime borrowers—those with bad or incomplete credit histories—struggle to pay for loans they possibly should never have received in the first place.

The average subprime borrower is now paying $400 more a month on his or her mortgage as it resets. Making the problems even worse, the houses these borrowers owe on are dropping in value. U.S. home prices fell by a record 3.2 percent in the second quarter of this year.

The falling prices and rising inventory (it would now take 9.6 months to sell off all existing homes on the market) make it difficult to sell or refinance a house without losing money. And those who have already missed a mortgage payment or owe more than what the house is worth can’t qualify for government bailouts from federal agencies.

The double whammy of increased payments and dropping home values means that as many as “half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can’t sell, refinance or qualify for help from the U.S. government” (Bloomberg, September 19).

With economists and experts now predicting the housing slump will extend into 2009, expect foreclosure rates to rise yet further. For more information on how the housing slump will affect the U.S. economy, read “Housing Woes Spread to Those With ‘Good Credit.’”