Qualify borrower of an ARM based on the what the payment will be if interest rates go to 10%.
Raise minimum FICO score requirements.
You know who’s to blame for all this: the investors who buy these products from the lenders. If investors demanded a proper risk premium for loaning $500K to a 630 FICO borrower with stated income, then that person wouldn’t qualify.
The Q is: why are global investos gobbling up these products? As long as there is demand for these loans, they will be made. (Like pornography, drug trade, and illegal immigration – demand fuels the trade, not legislation.)