For one thing, without cash flow, the lenders will soon close their doors. Looks at an Option ARM. The borrower pays the minimum but the bank books the whole amount of interest (a big chunk not paid) as income. How long do you think the lender will last with accrual income but no cash flow?
The loans don’t reset then income cannot be booked, or huge write downs must be taken. Lender goes out of business and the executives don’t get big bonuses.
