There’s no way foreclosures and defaults could zoom up as they have without a significant proportion of “ruthless” defaults.

A couple of points to consider:

1) ARMs are actually likely to reset lower in the current environment, as the FFR has fallen 325 bps.

2) Reports indicate that the majority of current defaults occur before mortgages reset (which would be more problematic for IOs with balloon or delayed amortization and negams.)