In discussing the ARMs (as opposed to option ARMs), he gives one sentence to the problem of teaser rates “In cases where lenders were aggressive, initial rates may have been lower than implied above, creating more of a reset problem down the road.” I was under the impression that these teaser rates were the rule rather than the exception. I have nothing to base that on though.

So I guess the questions are, just how many of these ARMs had teaser rates below the normal ARM rate? How low were the teaser rates? How long are the teaser rates in effect? Are the borrowers able to afford the payments at the normal rate (even if it does go down 1-2%)?