Are we supposed to be offering loans?

I don't believe it will.  I think the biggest issue is down payment.

ARMs are a trap that helped cause the foreclosure crisis.  They only work if rates are kept artificially low or incomes increase with the rates.  Fixed is the only way to go.

ARM loans can be a good option for some buyers. It can be the bridge to ownership.

I used to think ARM's were the Devils creation Peter Mohylsky, www.athome30a but as a Notary that closes loans for a living I have seen cases whey they fit perfectly. The borrower needs to work with a trusted lender and have both eyes wide open.

If you are going to be in the house less than 5 years, an ARM is a better way to go. IF you are buying your forever home, not so much. I used an ARM on my last purchase as I knew I would pay it off when our other home sold.  No brainer.

I think there is no one-answer-fits-all to this question. Sometimes ARM loans work for the borrower, and if they become very expensive, they still have options to look for solutions. The most important thing is the borrower to be aware of the type of loan they are taking, and why they are choosing it. In commercial real estate many loans are not fixed, for example.

I'm with Ryan Huggins - Thousand Oaks, CA on this one.

Only for the short-term. ARM loans should be well-understood by borrowers. It might work for the savvy ones that take precautions or have clear goals as to how long they plan to own the property they are purchasing with this financing. Affordability might vanish tragically once the ARM adjusts to a high fixed rate. 

A lot of co-op's (which is 70% of our sales) don't permit ARM's. Condo buyers are about 65% all cash- but of those financing- a lot use Jumbo ARM's because they rarely own an apartment for more than 7 years. Yesterday marked 20 years owning my apartment, so I don't fit the usual Manhattan demographic. I also only have 3 1/2 years left on my fixed rate 15 year mortgage.

I agree with Steffy!

If you have like a 3 year lock on an arm and plan on selling your current home it sometimes works out great to buy with that low rate now.  I think as short term rates continue to drop we can expect about another half point in mortgage rates by the end of the year.  We'll just have to see what the feds do with their rate which directly affects short term.

NO ! ARM mortgages lead to the short sales and foreclosures crisis. Reintroducing them to the market is dangerous, in my opinion only. Even for experienced borrowers, the risk of a job loss, income stream disruption or other life event can quickly become a disaster waiting. If it sounds too good to be true, there is always a catch. 

ARM's sound good, low.payments for a few years, but Borrowers are playing a game of I hope the market goes up, my salary goes up and rates stay low, so I can re-finance in a few years...yeah, go to Vegas if you want to gamble. 

Lenders care about loaning money, they don't care about the individual. 

I am with Gary Frimann CRS, GRI, SRES, ABR, SFR on this. 

Peter, It can get you in the game, these ARM loans can Peter Mohylsky, www.athome30a 

Not in the current market environment and not in the US.  Fun fact:  Most of the world operates on ARM loans.  In Canada, for example, rates are reset on borrowers based on the economy every few years.

ARMs did NOT, in fact, cause the financial crisis ---- incompetent lenders putting people in ARMs that should not have received them was one small part of the issues.  Predatory ARMs were an issue, but those no longer exist (for example, ARMs that were fixed for only 2 years but carried large prepayment penalties for 3+ years).

ARMs today are actually more difficult to qualify for than fixed rates - customers need to qualify at rates well above current market rates to qualify for any ARM with a term shorter than a 7 year fixed period, and most ARMs today are fixed for -5, -7-, or -10 years whereas before the financial crisis the fixed rate period was most commonly just 2-3 years.

That said, based on financial markets and the current spreads between long term and short term debt, there's (in most cases) not enough difference in rate between ARM and fixed rates for ARMs to make sense.

Had a client re-fi this week at 5.99 who purchased about 2 years ago when rates were 7ish.  Their ARM at 5.2 was about to go up a % in 45 days.  They have since sold a house (where the lived prior to retirement) and the bank is offering a very low re-fi fee in staying with them vs. moving the loan.

They can be an option, but the lender has to walk them through the risks associated with this product.

not really.