USA heading towards the 'new depression'?

US home foreclosures will rocket in 2008, signalling the worst slump since the Great Depression…

Subprime lending — mortgages with interest rates that suddenly escalate after a few years, forcing often naive and unprepared homeowners to default — has taken a heavy toll. Houses vacated by foreclosures are deteriorating into eyesores, encouraging crime, depressing property values, costing localities revenues they need for police and other vital services.

Some Northeastern cities — Cleveland, Buffalo, Pittsburgh among them — are said to be the hardest hit. Among the states, Florida, California and Indiana are registering the most foreclosures.

But the pain is being felt nationwide. The U.S. Conference of Mayors projects the weak housing market and large inventory of unsold homes may reduce cumulative U.S. home values by $1.2 trillion this year.

President Bush's so-called interest-rate "freeze," announced in late fall, is not having its intended impact. It’s entirely voluntary and is projected to apply to only 12 percent of the mortgage holders — none already in default in 2007 — that are likely to have severe difficulty making their monthly payments.

Some better ideas are before Congress, including a House-passed bill that requires lenders to verify all applicants' income and document their creditworthiness.