Monosyllabic Pedantry

Wednesday, July 01, 2009

The Option ARM Tsunami

According to Business Week, the majority of the Option ARM resets hasn't even happened yet.
For those two people who don't already know, Option ARMs (Adjustible Rate Mortgage) is where you pay a low interest rate for the first number of years, then the interest rate jumps up, or resets, to a much higher rate.

What many analysts fear are the waves of "resets", when the teaser interest rates for these products expire. That means Freddie Flipper, who bought that $1 million McMansion in 2006 as an "investment property", will see his monthly payment double on a house that's now worth $600,000. And he will, like so many others, walk away after dropping the keys in an envelope and mailing them to his mortgage company (i.e., "jinglemail").



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