Option-ARM loans represent fewer than 2 percent of all home loans, but those loans add up to nearly $300 billion because they were written to finance pricey homes, according to research firm First American CoreLogic.
So far, rates on many option ARMs haven’t risen because overall interest rates have stayed low. But if actions by the Federal Reserve push rates up, then option ARMs will go up as well.
Unless these option ARMS are quickly restructured, a large share of these borrowers will walk away, says Paul Leonard, director of the Center for Responsible Lending’s California office.
Source: Los Angeles Times, E. Scott Reckard (03/20/2010)