What a nightmare product! This reminds me of Japan’s “Generation mortgage”. Let’s say that prices drop a total 40% – 50% over the next 5-7 years, people will be stuck in these homes for a long, long time or they could choose to default. Without any calculations, I would guess that the monthly payment on these are only around $200 cheaper than a 30 year fixed per month. For a lender, this has to be right up there with neg am’s from a risk stand point. This clearly shows how desperate things are becoming.