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.

The current U.S. housing crisis involving subprime mortgages, increased foreclosures, mortgage industry layoffs, and reduced real estate sales started early last year and shows few signs of being over just yet. However, is the worst of the housing crisis over?

Unfortunately, many negative indications for the housing industry continue to appear in the news. On July 11, Bloomberg News reported that oil prices have reached a new record high and the government may need to “rescue” the Freddie Mac and Fannie Mae mortgage corporations. The two companies’ stock rapidly fell during the week over concerns about the implications of this.

High heating and transportation costs are making it more difficult for people to pay their home mortgages. Additional oil facility attacks by Nigerian rebels or a war involving Iran could push these expenses much higher. Elevated unemployment, high inflation, and rising food costs have likely contributed to the high rate of foreclosures and mortgage delinquencies as well.

Meanwhile, reports of continually decreasing home sales persist in newspapers across the country, and foreclosures remain common. A press release issued by RealtyTrac on the 10th indicated that the rate of U.S. foreclosures in June was fifty-three percent higher than it was during the same month last year. California and Nevada remain among the worst affected states.

However, there are some minor positive signs. Foreclosures in June did drop by three percent compared with May 2008, so it can’t be considered the worst month of the housing crisis in this regard. It too early to tell if this is a sign the worst is over, or if it is only temporary. Recent federal tax rebates and increased lender approval of “short sales” may be helping, to at least briefly, decrease the rate of foreclosures.

Mortgage industry layoffs are another area in which the worst of the housing crisis could be over. Although mortgage companies have announced new layoffs during June and July, a press release distributed by MortgageDaily.com on the July 7 indicated that layoffs from April through June were lower than they were in the first quarter of 2008 or the same period during 2007.

Overall, there are a few positive indications that the worst of the housing crisis might be over, but the crisis seems unlikely to end this year. The situation appears worst for people currently trying to sell homes, along with certain housing industry investors.