USA Today reports that more and more homeowners with adjustable rate mortgages are now struggling to keep up with payments:

     Take Robert and Lorraine Brown (78 and 72) of Florissant, MO, for example.

     Two years ago they refinanced their home to pay off some bills. Now the rate on their ARM has increased from 7% to 10.5%.

     To make ends meet, they have switched to a cheaper phone service, cut back on groceries and sometimes delay buying medications.

     Holding back tears, Lorraine says, "We were having a hard time meeting bills at the time we refinanced. It seems once you get behind, you do desperate things to catch up, and you never do."

     The Brown's are not alone. Nearly 25% of mortgages – 10 million – now have adjustable interest rates. In California, nearly 75% of new mortgages last year were ARMs or other non-conventional mortgages.

     With interest rates going up, ARM payments are soaring. For example, in California, Paul and Sandra Wilson's payments on their new interest-only loan leaped from $2,275 to $2,800 in less than a year. What's more they're stuck with these high rates. If they refinance within three years, they are required to pay a $20,000 penalty.

     The problems are nationwide. Chris Krehmeyer, executive director of the homeowner support organization, Beyond Housing, says:

      "Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM loans."

     Homeowners with ARMs have good reason to worry. "Of the 7.7 million households who took out ARMs over the past two years to buy or refinance, up to 1 million could lose their homes through foreclosure over the next five years.," according to Christopher Cagan of First American Real Estate solutions.

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