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From CNN.Money.

Americans continue having difficulties paying their mortgage obligations, with December foreclosure rates above the 100,000 mark for the fifth straight month.

The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 percent from November but up 35 percent from December 2005, according to RealtyTrac.

Any possibility all of those Adjustable Rate Mortgages had something to do with that? Yep:

Adjustable-rate mortgages, especially subprime ARMs, continue to drive the spike in foreclosures: many of those loans are due to reset in 2007, and many of the loans written in 2006 are performing less well than in previous years.

"The combination of slower home sales and rising interest rates on ARMs continues to drive foreclosures at significantly higher numbers than a year ago," said James J. Saccacio, chief executive officer of RealtyTrac.

These loans account for 30% of loans sold in 2005 and the first half of 2006.

So -- how were these products sold? In recent Congressional Testimony (see page 3-4), the General Accounting Office made the following observations about Alternate Mortgage Products (AMPs).

1.) AMP lending tripled over the last three years.

2.) Lenders relaxed lending standards

3.) Borrowers may not understand all the risks of AMPs because the documentation is complicated, poorly written and advertised inappropriately.

Another noted, "Increasingly, these products are marketed as affordability products... which is to say potential borrowers could use these products to afford larger homes."

The FDIC conducted a review of six lenders who underwrote about half of the sub-prime market. Their report concluded:

The review found a loosening of underwriting standards, some instances of borrowers not being qualified on a fully amortized loan basis, and in increase in second mortgages and other practices that uncreased the underlying risk.

A careless industry has led to a deteriorating sub-prime mortgage market:

In a conference call titled "How Bad is Subprime Collateral?" Tom Zimmerman, head of ABS research for UBS, and David Liu, head of mortgage credit, discussed how much higher loan delinquencies and foreclosures are for 2006 subprime loans compared with similar subprime loans from earlier years -- the result of deteriorating underwriting quality from lenders combined with a slower housing market.

Still, despite the adverse conditions, "I guess we are a bit surprised at how fast this has unraveled," said Zimmerman. While it's "not a secret that subprime collateral has performed pretty disastrously so far," he said, "I must say we were a bit surprised by the magnitude with which" the loans "deteriorated this year."

The rate of subprime loan delinquencies of 60 days or more -- meaning borrowers are that far behind in their payments -- has climbed to about 8 percent, up from about 4.5 percent a year ago.

These 60-day plus delinquencies jumped up fairly sharply in the past few months, to 3.63 percent for the 2006 loans in October, up from 2.95 percent in September and 1.62 percent in July, according to UBS research.

Comparing loans of similar age, 2006 loans are performing worse than 2005, which are worse than 2004. In fact, given where delinquencies are now, loans from 2006 are on track to be among the worst-performing ever, along with the 2000 to 2001 years, according to UBS research.

And not only have delinquencies risen faster in 2006 than in earlier years, Liu noted in the presentation, but 2006 loans have entered the foreclosure process faster. In October 2006, the foreclosure rate was about 2 percent, while a year earlier it was 1 percent.

So,

1.) Foreclosures are increasing, in part because

2.) Lenders relaxed standards,

3.) Misrepresented some products, and

4.) Did a poor job of explaining risks to potential buyers.