I remember a couple years ago we were talking about rate increases being inevitable and how some of the bulls told us they thought we were crazy. Perpetually low interest rates were a staple of the bulls’ arguments over the years.

The bump to 8% is just the opening move. By the time this first wave of ARM resets is over and all that damage is done the rates will be higher than that. The second wave of ARM resets appears to be comprised of a larger percentage of the most neg-amortization loans. Coming after the blowout caused by the first wave, the fallout from the second wave will probably be even worse.

Let’s all stop for a moment to ponder what interest rates will be like by the time this second wave of ARM resets maxes out.