I think there is one part of this blanket statement which greatly influences how many fall in the last 2 categories. All ARM’s are not Suicide loans or Exotic loans. There are many ARM’s that are relatively safe. For example a 10/1 ARM that converts to a 30 year fixed at the same rate is not very risky. The real culprit is the Pay Option ARM’s that result in HUGE COMMISSIONS to Mortgage Brokers (I believe as high 3 points) that have 2 year prepayment penalties and buyers qualifying on low initial start rates. Someone taking out a 5/1 ARM in the last year is getting a rate within 1% of the 30 year fixed rate and will have a good chance of be able to deal with a reset in 3 to 5 years.
The answer to all of this is that we just dont know how many of the ARM’s fall into each category and how many of the TRUE Exotic/Suicide loans are in the hands of the most vulnerable.
BTW Lookoutbelow, Realtors to my knowledge dont push specific loan products (at least the ones I know). It is the lender who helps the buyer select a loan product. That is why as a buyer, you should NEVER do business with a combination Loan Broker/Realtor as the conflict of interest is HUGE! I also do not drive a leased expensive foreign car, a good old American Vehicle fully paid off is my ride of choice!
