Yeah, I don’t understand why people took on ARMs in 2003-2005 when interest rates where at their lowest.
It doesn’t make sense unless the ARMs (most specifically interest only ARMs) were the only things they could afford.
If that’s the reason, then any upward adjustment in monthly payments will cause real hardship.
Another point to consider is that buyers took on ARMs because they never planned on holding that debt beyond the initial “sweet” period. That means they were counting on appreciation to sell at a profit of refinance later.
Now that the market is down, all those buyers will be facing trouble.
Last year, I visited a project and the loan officer told me that nearly 100% of the buyers were 0% down ARM borrowers.
