Option ARMs

[maxtower]

I saw on armcrash.com (not sure of his source) that 12% of mortgages originated in 2006 were option ARMs and that 80% of people with option ARM payments make the minimum payment, which actually increases the size of their loan.

Even if someone with good credit gets duped into taking one of these loans on, if they don't realize the severe impact of additional principal increases, I would think that this will lead to a lot of problems after this subprime stuff slows down.

[AggroFish]

I've put many people in option arms and refinanced a bunch out. It's not a bad loan, but pushed on the wrong person for the wrong reasons, it'll cause a lot of problems.

There's a BIG majority of people that were, as you say, "duped" into a neg am loan not realizing that their payments went up. The problem is the brokers that max out the margin with a 3yr hard pre pays to make 4pts on the back. Meaning, fully indexed rates in the mid to high 8s, min payments at 1 - 1.5 percent, insane amounts being deferred + declining property values = recast central for those that went max LTV.

Problem isnt coming it's already here. I saw it coming earlier this year and when New Century went under, that was it...I was done.