Adjustable-rate mortgages (ARMs) have multiple features, which makes them complicated. Because complexity doesn't sell well, most loan officers try to avoid it by focusing on one feature that may attract the client's interest; this is the "hook." ARM hooks are almost always mortgage payments that are relatively "low," or "stable," or "interest-only." When more persistent borrowers ask questions about the implications of low, stable or interest-only payments, the response may be an "artful deception." The loan officer makes a correct statement about the ARM, from which the client is allowed to draw an erroneous conclusion without being corrected. The letter below illustrates one of the more common artful deceptions. "I am interested in an adjustable rate mortgage (ARM) because it has a r...
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