How many of those adjustable rate morgages had a low teaser rate? I know that was the first thing blamed when subprime hit. So I then ask, did this same low teaser rate also happen in Joe Alt-A’s loan? Did his interest rate go from 2% to 6%? Plugging that into a payment calculator, a 400’000 loan goes from 1190 to 1920. That is a big reset, even if the new rate is actually a good rate overall. To someone who is overextended and without any real savings at all (average american savings rate is negative) $700 a month can be a killer.
