Today, Bloomberg carried a story suggesting that the losses experienced from the housing market could be "just the tip of the iceberg". Anyone who has followed the housing bubble blogs will know that this sorry reality has been known for quite some time.

Too many adjustable mortgages, coupled with lax lending standards, and an explosion of property prices; that is hellish brew. It will lead to only one outcome; massive defaults followed by a financial crisis. This is what we see now emerging, with almost daily news stories highlighting banks in trouble and foreclosure rates going through the roof.

June 22 (Bloomberg) -- Losses in the U.S. mortgage market may be the ``tip of the iceberg'' as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.

Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.

Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.

Bear Stearns, the second-biggest underwriter of mortgage bonds, offered to provide $3.2 billion of financing to rescue one of its hedge funds. Concern about the collapse of the funds, which made bad bets on securities tied to mortgages, sent bonds and stocks of finance companies lower.

Homeowners who can't afford to pay higher interest rates may struggle to sell their properties as home price increases slow, and stricter lending standards will make it harder to refinance, the Bank of America analysts wrote today. Interest payments on about $900 billion of the riskiest subprime home loans are due to increase this year and next, they said.

Countrywide Financial Corp. and IndyMac Bancorp Inc., two of the largest U.S. home lenders, may suffer more than other finance companies because they hold mortgages as well as selling them off to investors, the analysts wrote. The companies may not have set aside enough money to cover losses, said Bank of America, which has a ``sell'' recommendation on both lenders.

The proportion of income that U.S. households with mortgages used for making payments in the first quarter of 2007 was close to or above the previous high in the late 1980s and early 1990s, the analysts said. U.S. mortgage borrowers will continue to find it harder to pay their debts until the end of next year, the analysts said.