People not able to refinance is certainly a huge factor that I hadn’t thought of. I always thought every reckless borrower will get bailed out by the (still) low long-term yields. We will see what will be the predominant reasons for the no-refinance situations. Sure, missing equity comes to mind, this either through falling appraisals or if the ARM was with negative amortization. Maybe credit standards are already tightening, too. Do I understand this correctly: Suppose the Fed raises the short-term rates again for a few times. Even if the yield-curve inverts and offers attractive long-term yields, some people might be stuck with whatever contract they signed initially, which could even mean paying higher rates than the 10-year. They are screwed!
