I forgot to add that in the major Option ARM programs I’ve reviewed, no matter what the index used, the 3-4 payment “options” ran out after 60 months (five years). Beginning in month 61, the borrower paid the index plus the margin.
I’m aware that the more current Option ARM programs had more nuances built into them (ex: borrower pays same index + margin for 12 months and then their mortgage is recast to the prevalent index (+ borrower’s margin).
