PS –
It sounds to me like you are assuming most of the ARMS that are resetting in 2007 are from people who purchased in 2004-2005 with 0% down.
I know for a fact that the most popular ARMS in the 2002 to 2–3 time frame were 5-year interest-only ARMS. So all those people who purchased in 2002 will have theirs re-set next year as part of that 25%. The 25% ARM resets does not include solely the 1-year and 3-year option-ARM purchasers in 2004-2006. Might it also include people who had traditional ARMS (not interest-only) ?
Without these details it would be difficult to asses the impact and predict 75 % or 90% default.
For the record, I have an interest-only ARM at 5.625% on a SFR rental property I purchased in 2002 (refied in 2003) for less than 350K in Central Coastal SD. This ARM has a balance of ~270K and it re-sets in 2008. If I paid points I could refi it to 30-year fixed today at less than 6% for costs of less than 10K.
