The U.S. may experience another shock wave of foreclosures as early as next year, sooner than expected, according to data released Tuesday from Fitch Ratings.

The company reported that almost $29 billion worth of option adjustable rate mortgages (ARMs) are poised to reset next year based on its analysis of a large group of loans originated in the last phases of the recent housing boom. 

Pay option ARMs differ from other ARMs in that borrowers are allowed to choose from four different payment options each month during the initial term. The option most exercised by borrowers is the lowest payment amount, which does not even cover the full amount of monthly interest due on the home loan.  After making only this minimum payment for several years, and with the aid of decreasing home values, many homeowners find themselves in upside-down mortgages, meaning they  owe more on the mortgage than their home is worth.

Lenders only allow borrowers to build up a certain amount of negative amortization on their home loans before they reset the interest rate and require higher payments.  And as most option ARM borrowers have only been making the minimum payment since their loans began,  their  mortgage interest rates will reset sooner than they otherwise would have.

Fitch Ratings has estimated that most of those with these option ARMs will see an increase of $1,053 in monthly mortgage bills, a figure that is likely to be too high for many to keep up with, resulting in mass foreclosures across the U.S. once again.

“The combined impact of payment shock, negative amortization, declining home prices and restricted availability of mortgage credit may leave many option ARMs’ borrowers unwilling to continue paying their mortgage,” said Group Managing Director and U.S. RMBS group head Huxley Somerville in a statement.

According to the credit rating firm, the foreclosure wave is likely to last well into the beginning of the next decade, as there are an additional $67 billion in pay option ARMs  due to reset  in 2010.