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Hidden underneath the housing boom is a very dangerous time bomb. And if this report from Business Week is to be believed, it looks about set to go off.

The truth is that this is something people have been predicting for quite some time. Back when the .com bubble burst, Fed Chairman Greenspan encouraged the growth of a housing bubble to help prevent broader economic collapse. The idea was that the bubble could eventually be brought in for a "soft landing, a double or nothing gamble that always had the potential to backfire.

Atrios is right. This is an issue that the Democratic Party needs to get out in front of, and fast. Even if we manage to make the miraculous "soft landing" necessary to avoid a deep recession (or worse), it is clear some federal action is indeed necessary to crack down on predatory lending. Yes - of course - people are ultimately responsible for their own decisions, but given that a housing bust would have huge implications for the entire nation....

The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home -- or so they thought. The option ARM's low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance.

The bill is coming due. Many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules -- often to the astonishment of people who thought the low installments were fixed for at least five years. And because home prices have leveled off, borrowers can't count on rising equity to bail them out. What's more, steep penalties prevent them from refinancing. The most diligent home buyers asked enough questions to know that option ARMs can be fraught with risk. But others, caught up in real estate mania, ignored or failed to appreciate the risk.