The Second Wave of Monetary System Failure - Option ARMs and Alt-A loans

Option ARMs and Alt-A loans this will be worse than the sub prime mortgage crisis. Ordinary ARM loans, which are riskier than fixed-rate loans, apparently aren’t risky enough for many borrowers. The MBA says that their market share fell from 46% in the second half of 2004 to 36% in the first half of 2005. Why? Partly, it seems, because more people chose option ARMs. Those, of course, are specialty ARMs that give you the option to pay even less than the monthly interest you owe. The unpaid interest gets added onto your principal (negative amortization). Option ARMs climbed from 17% to 23% of first-mortgage originations.