12.28.2007

Put-option ARMs come home to roost

Today the LA Times reports something we told you almost a year ago: people with pay-option ARMS on underwater houses will stop paying their mortgages.

That's why we call them put-option ARMs: the buyer has a free option to put the underwater house back to the bank! No money down, home values dropping, payments increasing -- hmmmm.... what to do????

Only the truly stupid would continue making mortgage payments on a negative-equity house. And only the truly stupid would have written these loans to buyers who had no skin in the game in the first place.

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