What is the current state of the adjustable rate market? Aurora just announced that on their "neg am" ARM
loans, the borrowers must qualify at the fully indexed rate as well as the maximum negatively amortized loan
amount. It is predicted that other lenders will follow. Too many lenders are seeing the public and regulatory
backlash as a result of borrowers having trouble making payments. A borrower who took out a typical 3/1 hybrid
ARM three years ago is likely watching that rate jump to about 7% now as those loans reset. The vast majority of
borrowers that accepted products that put them in difficult circumstances are going to be able to refinance out,
however, creating a potential bonanza for loan officers and brokers. However, those borrowers that have option
ARMs, which allow borrowers to make monthly payments so low they don't cover the full interest charge, may
have a little more difficulty.
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