-Looking ahead, and assuming rates stay low, those in 3-1 ARMs originated in 2006 are likely to see significant resets lower.

Two problems here. One the fed solved alot of the reset problem with significantly lower rates. Ok, but then next year this loan resets again, and again the year after that. Now inflation is running amok and the most recient fed cuts are not priced into that. Eventually they will have to face reality and pull a Paul V and raise rates. Suddenly all those problems come right back.
Now you could argue that time will increase wages, making this not a problem, but we are headed into a recession, when wages fall. Itll be many many moons before wages reach a point to support these loans. Also, increased inflation will take care of any excess wages people are earning in the next year or two.

-“The second problem in regards to POAs is that a huge portion of these loans originated if the least affordable, biggest bubble areas, like Florida, California, Las Vegas, etc. From a lender’s perspective that hugely increases the likelihood of default as well as the size of the problem should default occur.”

You could also fix all this if people could REFI, but they cant. The values of alot of these places are already in 2004 or worse. In places like MM we are seeing 2001 pop up. These loans are underwater and no one cept a gov bailout will refi them, no matter what the interest rate is.

So basically you have a Mexican Stand off. If the Fed keeps rates low inflation goes up, hurting any recovery. If it raises rates we are right back where we were with unaffordable payments. Cant lower your gun, cant shoot. So 2008 isnt the year we suffer the pain, 2009 or 2010 is. So what? Actually, Great, right when all those other problems that have not been fixed blow up we can have this one hit too. They can delay the pain or spread it out to alot more people (taxpayers) but it will all be felt one way or another.