The option ARM loans are going to make sub prime loans look like child’s play. Almost no one in one of those loans stands a chance at keeping their home. Between the neg am. portion added to the initial loan balance, depreciation and a payment that increases over 2x when the loan resets, these folks are SCREWED. As a former wholesale mortgage AE, I don’t recall ever being able to help a borrower get out of the option ARM. If they were lucky enough to have enough equity, the deal died as soon as the borrower heard what their new payment would be. Most people could only afford the minimum payment. That’s how the $300k homes in Chula Vista turned into $1m homes. I chose not to work for a lender that offered the option ARM because it is guaranteed to turn the home owner into a home renter. I didn’t want to go to bed knowing that it would only be a matter of time before the borrower loses their home.
Go to google and type in “map of misery”. It is not pretty for SoCal.
